The decline in wheat prices and sales in the first half of the year dragged down revenue, and the increase in gross profit of rice and corn contributed to profit growth. The company is committed to promoting the transformation of grain production from increased production to increased efficiency, and high-quality profit growth can be expected.
The decline in wheat prices and sales dragged down revenue, and the increase in gross profit of rice and corn contributed to profit growth. The company expects 24H1 to achieve sales revenue of 5.06 billion yuan (yoy -4.4%), net profit of 0.295 billion yuan (yoy +4.8%), and EPS of 0.2 yuan. Among them, it is expected to achieve revenue of 2.72 billion yuan (yoy -4%), net profit of 0.166 billion yuan (yoy +2%), and EPS of 0.1 yuan in the second quarter. The decline in revenue in 24H1 and Q2 was mainly affected by lower inventories at the beginning of the period and lower food prices. The sales scale of agricultural products such as wheat declined during the reporting period: in the first half of the year, total sales of wheat (self-produced+imported) fell 33.8% year on year, wheat seed sales fell 61% year on year, and rapeseed sales fell 72% year on year. On the profit side, the significant improvement in profitability in 24H1 and Q2 was mainly due to a decrease in the unit cost of stocked rice and corn at the beginning of the period and an increase in gross profit; in addition, prices of most agricultural products declined in the first half of the year, but the price of japonica rice bucked the trend (average price increased +7% year-on-year in the first half of the year), contributing to the increase in performance. Overall, the performance was in line with expectations.
The company is committed to promoting the transformation of grain production from increased production to increased efficiency. Since the summer planting in 2020, the company's operating land area has grown steadily, and the fall planting area expanded to 1.295 million acres in 2023. Based on its advantages in high-quality arable land resources and the continuous improvement of agricultural science and technology, the company has achieved remarkable results in grain production in the past few years. In 2024, the company will further focus on its main business, promote the transformation of grain production from increased production to efficiency, and comprehensively enhance the company's overall competitiveness and profitability.
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. 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 production and operation of the main planting business has been stable, moderate and positive for a long time. Currently, the company is responding positively to the national policy call to increase grain production capacity, and is focusing on promoting the transformation of grain production from “increasing production” to “increasing efficiency”. In the medium to long term, high-quality profit growth can be expected. From 2024 to 2026, the company is expected to achieve net profit of 0.953 billion yuan/1.082 billion/ 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.