Incident 1: The company released its 2023 annual report. During the reporting period, the company achieved operating income of 4.120 billion yuan, a year-on-year decrease of 3.41%, and realized net profit to mother of 236 million yuan, a year-on-year decrease of 28.26%. In Q4, the company achieved revenue of 1,061 billion yuan, up 0.08% year on year and 107.03% month on month; realized net profit to mother of -44 million yuan, down 71 million yuan year on year and up 13 million yuan month on month.

Incident 2: The company released its 2024 quarterly report. During the reporting period, the company achieved operating income of 1,827 billion yuan, an increase of 35.76% over the previous year and an increase of 72.27% over the previous year; realized net profit of 454 million yuan, an increase of 108.03% over the previous year, and 499 million yuan over the previous year.

Revenue from the company's fresh food consumer business increased significantly in '23, and performance improved month-on-month in Q1 in '24. Pesticide prices were low in '23, and sales revenue from the pesticide formulation business fell 10.56% year on year. In the fresh consumer business, the company used blueberries as a strategic crop, actively built a new farm organization, and successfully completed mass production and marketing tasks in the first year. Sales revenue from the fresh consumer business increased 278.76% year on year. Among them, pesticides, fungicides, herbicides, plant nutrition, plant growth regulators and additives, crop series, agricultural services and trade, and fresh consumption achieved revenue of 11.22, 8.70, 4.58, 7.62, 0.78, 0.66, 1.10, and 618 million yuan respectively, with year-on-year changes of -9.68%, -12.89%, -14.87%, -11.85%, +7.92%, -51.30%, -36.12%, and +271.06%, respectively. In terms of sales, pesticides and fertilizers and fresh consumer products achieved sales of 30.71 and 24,700 tons respectively in '23, with year-on-year changes of -28.37% and +61.01%, respectively. The company's gross sales margin was 29.45% in '23, an increase of 2.34pct over the same period last year. In 24Q1, the fresh food consumer business continued to expand, and its sales revenue increased 468% year over year.

In the field of fresh consumption, in the future, the company will firmly establish the strategic direction of the single specialty crop industry chain. In 24, the production area of raw blueberries in Yunnan was further expanded, consolidating the implementation of growth garden technology and high-quality blueberry production, and channel marketing was further improved, focusing on breaking through large KA customers; Sanya dragon fruit was produced and exported steadily, and bird's nest fruit entered the first year of mass production.

The production capacity layout has been steadily increased, and multiple product registration certificates have been approved to expand the scope of product use. In terms of production capacity, by the end of '23, the company currently had a production capacity of 2.6, 1.8, 2.5, 1.1, and 0.04 million tons/year for pesticides, disinfectants, herbicides, plant nutrition, and additives. The company's pesticide production capacity was 0.19 million tons/year, which is currently in the trial operation stage. In terms of registration certificates, by the end of '23, the company and its core subsidiaries had a total of 1,467 registration certificates for pesticide products, covering important diseases and pests in major domestic food and cash crops. Affected by the previous environment, the progress of some registration projects was affected to a certain extent. In 23, a total of 6 product registration certificates were added, and at the same time, several products were approved to expand the scope of use and change registration, involving fruit trees, specialty small crops, etc.

Profit forecast, valuation and rating: We maintain the company's 24-25 profit forecast and add a 26-year profit forecast. The company's net profit for 24-26 is estimated to be 619/7.70/859 million yuan, respectively. The company is the largest pesticide formulation company in China. It lays out the high-end planting industry to start a second growth curve. It is optimistic about the company's long-term development and maintains the company's “gain” rating.

Risk warning: The risk that production in the planting industry falls short of expectations, pesticide demand falls short of expectations, and the risk of cost fluctuations.