2023Q4's performance is booming, and genetically modified seeds are expected to open up room for growth and maintain a “buy” rating
In 2023, the company's revenue was 1,552 million yuan, +17.06% year on year, net profit attributable to mother of 256 million yuan, +1.01% year on year, after deducting non-net profit of 177 million yuan, +9.35% year on year. Non-profit and loss due mainly to fair value changes of 508.534 million yuan and government subsidies of 31.9784 million yuan. 2023Q4's revenue was 898 million yuan, +17.84% YoY, and net profit to mother was 160 million yuan, +13.85% YoY. The company's main corn business has steady sales, and the release of genetically modified seeds is expected to open up room for growth. We maintain the 2024-2025 profit forecast and add the 2026 profit forecast. The company's net profit for 2024-2026 is 2.95/3.89/499 billion yuan, EPS is 0.34/0.44/0.57 yuan, respectively. The PE corresponding to the current stock price is 28.6/21.7/16.9 times, respectively, maintaining a “buy” rating.
Production costs and hot weather suppress profit margins. The sales and management expense ratio continues to optimize the company's gross sales margin of 28.77% in 2023, -3.11pct year on year, 19.28% net sales profit margin, -2.52pct year on year. The decline in gross margin is mainly due to rising production costs and a decline in seed production due to hot weather. As weather conditions improve, production costs are expected to drop in 2024. In 2023, the sales/management/R&D/finance rate was 4.57%/7.04%/4.30%/-2.14%, -0.06pct/-0.37pct/+0.55pct/+0.01pct. The company's sales and management expenses continued to improve. The increase in R&D expenses was due to the company implementing scientific research projects and increasing R&D efforts. R&D expenses increased 34.29% year over year to 67 million yuan. In 2023, the company planned to reduce inventory prices by 7.442 million yuan, of which the corn seed business estimated 7.1697 million yuan, mainly due to the slow sales backlog and unsatisfactory quality of some of the company's corn seeds.
The main revenue contribution of corn seeds was stable, and sales of wheat and rice seeds increased rapidly (1) Corn seeds: In 2023, corn commercial grain prices were stable, combined with government agricultural policy protection, farmers' enthusiasm to grow food increased, and demand for corn seeds was strong. The company's corn seed revenue was 1,353 billion yuan, +15.25% over the same period last year.
The gross profit margin of corn seeds was 29.17%, -4.07pct year-on-year. In terms of new product reserves, 14 varieties, including Denghai 1868 and Denghai 1921, passed the 3rd meeting of the 5th Crop Review, and 2 genetically modified varieties, Denghai 605D and Denghai 533D, passed the 4th agricultural crop review meeting of the 5th. (2) Other seeds: Revenue from wheat/rice/vegetable seeds in 2023 was 1.11/0.45/0.14 billion yuan, +25.23%/+69.13%/-6.04% year-on-year. In terms of new product reserves, wheat seeds entered the sea 217 and passed the second meeting of the 5th Crop Review Conference. By the end of 2023, the company had applied for 287 variety rights and obtained 185 variety rights.
Risk warning: the risk of commodity food price fluctuations, a sharp rise in production costs, etc.