Net profit after deduction in 2023 was +2.9%, which is basically in line with our expectations of 2023: revenue of -4.4% to 12.17 billion yuan in fiscal year 23, net profit of -1.2%/+2.9% to 82/70 million yuan; 4Q23 revenue -4.6% YoY to 3.55 billion yuan; 4Q23 revenue -4.6% YoY to 3.55 billion yuan, and net profit attributable to mother/non-post-deducted mother net profit YoY +28.3%/+42.8% to RMB 29/260 million; the company's performance is consistent with the rapid report and is basically in line with our expectations. The slight decline in net profit due to the decline in the edible oil market in '23, the sales price of the company's main oil products fell, and profit margins narrowed.
Development trends
Grain production and yield reached new highs, and the main farming business is developing steadily. 1) Main farming business: Producing 1.37 million tons of grain in 23 years, +9.0% year on year; the yield of rice in the headquarters was 2,481 kg/mu, +8.8%; increased production boosted the revenue of the planting industry +8.9% year over year to 3.80 billion yuan, of which income from wheat and rice was +2.1%/+16.7% year over year. 2) Seed industry: Revenue of 2.31 billion yuan, +19.8% year over year, benefiting from the export sales volume of wheat and rice varieties, sales volume +39.9%/+25.0% year over year. 3) Rice industry: Revenue of 3.82 billion yuan, -16.3% year-on-year, mainly due to the contraction in the scale of raw grain trade, rice/raw grain revenue was +1.3%/-26.6%, respectively. 4) Agricultural services: Revenue of 2.84 billion yuan, +10.7% year-on-year, annual fertilizer procurement and sales of more than one million tons, serving more than 10,000 large enterprises. 5) Cooking oil: Revenue of 2.51 billion yuan, -23.7% YoY, mainly dragged down by falling oil prices.
Government subsidies have been rising steadily, and profitability has improved slightly. 1) Gross profit margin: The company's gross margin in '23 was -0.1ppt to 13.2% year on year. We think it was mainly due to the year-on-year decline in grain and oil prices in '23, but the company reduced the gross margin decline by reducing costs and increasing efficiency. 2) Expense ratio: Sales/management (including R&D) /financial expense ratios remained flat to 1.6%/5.5%/2.0% year-on-year, respectively, and were mainly due to an increase in the company's operating expenses such as transportation and travel and investment in breeding research and development projects. 3) Government subsidies: The company received 400 million yuan in government subsidies in 23 years, taking into account current profit and loss of 380 million yuan, +2.8%/+5.5% year-on-year respectively. 4) Under the combined influence, the company's profitability improved slightly, and the net interest rate to mother in '23 was +0.2ppt to 6.7% year-on-year.
The main planting business is moving forward steadily, the entire industry chain is exploring space in a closed loop, and continuing to give back to shareholders with high dividends. 1) In the short term, we judge that the domestic food supply will be relaxed this year, and the price of rice and wheat may be weak, but the company is still expected to benefit from falling pesticide and fertilizer prices and internal cost reduction and efficiency to achieve steady growth in the main growing business. 2) Looking at the long term, on the one hand, the company is actively promoting an integrated expansion development strategy. We believe it is expected to gradually form a closed loop of “seeds and agricultural supply+technical service+product recycling” to explore new growth points; on the other hand, the company's various industrial chain subsidiaries have actively promoted capacity expansion and resource integration in recent years, and endogenous and epitaxial development can be expected. 3) In addition, the company plans to pay a cash dividend of 3 yuan for every 10 shares in '23, with a dividend ratio of 50%. The current stock price corresponds to a dividend rate of 2.9%. Since listing, it will continue to give back to shareholders with high dividends.
Profit forecasting and valuation
The current stock price corresponds to 24/25 16/15 times P/E. Considering weak food prices, the 24-year net profit forecast was lowered by 10% to 890 million yuan, introduced a 25-year forecast of 970 million yuan, and the target price was lowered by 14% to 12.5 yuan, corresponding to 19/18 times P/E in 24/25, with room for 19% increase, maintaining the outperforming industry rating.
risks
Natural disasters; food price fluctuations; product quality risks; changes in land circulation and government subsidy policies.