Q1 High sales volume of rice grains and edible oil products contributed to the main profit increase; sales of wheat grains and wheat varieties declined due to falling wheat prices. The company's increase in grain production and efficiency are progressing in parallel, and an increase in medium- to long-term profit levels can be expected.
Sales of rice and edible oil products increased rapidly, and sales of wheat grains and wheat varieties declined due to falling wheat prices. The company achieved sales revenue of 2.34 billion yuan (yoy -4.8%), net profit of 130 million yuan (yoy +8.6%), and EPS of 0.1 yuan in 24Q1. Benefiting from the rise in Japonica rice (+7% year on year), the 24Q1 company's sales of rice and rice varieties increased year on year, or contributed to the main profit increase; we judge that the decline in wheat prices or the main reason for the decline in the company's revenue in the first quarter: 2024Q1, the average spot price of domestic wheat was about 2,804 yuan/ton, down 11% year on year. The company's sales volume of wheat grains and wheat varieties declined by a total of 101,000 tons, down 3% year on year; in addition, sales of wheat seeds fell 5% year on year.. On the profit side, the company's profitability improved significantly in 24Q1, with a gross sales margin of 13.93%, an increase of 1.16 pct over the previous year, or mainly due to a sharp rise in the volume and profit of agricultural products such as rice. At the same time, the company continued to reduce costs and increase efficiency. Overall, the performance was generally in line with expectations.
The scale of cultivation continued to expand, and grain production reached a new high. Since the summer planting in 2020, the company's operating land area has grown steadily, and the fall planting area expanded to 1.295,000 mu in 2023. Based on its advantages in high-quality arable land resources and the continuous improvement of agricultural science and technology, the company's grain production reached a new high. In 2023, the total yield of the company's grain and oil crops was 2,737 billion kg, the annual yield of rice and wheat of the headquarters was 2,481 kg, and the annual yield of the expanded base was 2,159 kg. The total grain output and annual mu yield all reached the highest level in history. Combined with the company's land resource endowments and productivity growth, it is expected that the company still has a lot of room to improve its grain production capacity in the future.
Cost savings and efficiency increases continue to advance, and high-quality profit growth can be expected. Mainly reflected in: 1. Improving planting efficiency:
By strengthening advanced technology and strengthening process management, the company has significantly reduced the incidence of weed rice. The cost of all types of crops per mu has been reduced, and production efficiency has continued to improve. 2. Optimize product structure: The company accelerates the layout of high-value-added industries, carries out specialized division of labor through leading subordinate enterprises, actively expands external markets, and continues to expand brand value. In the medium to long term, the company's profit level is expected to increase significantly.
Maintain a “Highly Recommended” investment rating. Currently, food supplies at home and abroad are tight, and food prices may rise or fall easily. Based on the company's unique advantages in arable land resources and the business model of integrated and collaborative development of the entire industry, the company's grain production increases in production and efficiency, and an increase in profit levels can be expected. From 2024 to 2026, the company is expected to achieve net profit of 953 million yuan/1,082 million yuan/1,105 billion yuan, corresponding EPS of 0.69/0.79/0.80 yuan respectively, maintaining a “highly recommended” investment rating.
Risk warning: Prices of agricultural products have not risen as expected, agricultural costs have risen more than expected, natural disasters, major changes in the national minimum purchase price policy for grain; there is a risk that performance will not meet expectations.