Incident: Dabeinong released its 2024 semi-annual report. The company achieved operating income of 13.095 billion yuan in the first half of the year, a year-on-year decrease of 16.42%; net profit to mother -0.156 billion yuan (within the previous performance forecast range). Among them, 24Q2 achieved operating income of 6.388 billion yuan, a year-on-year decrease of 19.03%; net profit to mother was 0.054 billion yuan, an increase of 111.51% year-on-year.
24H1's feed sales declined slightly but gross margin increased, and pig production indicators continued to improve 1) In terms of feed, feed sales declined slightly and profitability improved. Due to the decline in pig production capacity, etc., sales volume declined slightly. Feed sales were 2.5335 million tons, down 8.92% year on year (of which pig feed sales were 2.0029 million tons, down 10.01% year on year; ruminant feed sales were 0.2971 million tons, down 8.62% year on year.) ; Feed sales revenue was 9.226 billion yuan, down 20.52% year over year. The company continued to optimize raw material procurement and production control. 24H1's gross margin of feed products reached 12.67%, an increase of 0.56 pct over the previous year. The profit contribution of the 24H1 feed business remains steady.
2) In terms of pigs, the company's breeding performance has improved significantly. The total pig sales volume of 2024H1's holding and participating companies was 2.8482 million, up 2.45% year on year; the holding company's pig sales revenue was 2.654 billion yuan, down 3.54% year on year. 24H1's sow production costs, fattening production indicators, and period expenses are all continuously improving. Among them, the company's pig business achieved profit in 24Q2. At the end of 24H1, basic sows and reserve sows were kept at 0.328 million, fattening pigs were kept at 2.7359 million, and piglets were kept at 0.5339 million. We believe that pig prices are expected to continue to prosper in the second half of the year. As the company's management level continues to improve, the company's pig sector is expected to continue to be profitable in the second half of the year.
The company's seed promotion network covers all major ecological zones across the country. I am optimistic that the company's genetically-modified business advantage 24H1 will sell 19.98 million kilograms of seeds, an increase of 87.74% over the previous year. Seed sales revenue was around 0.3 billion yuan, up 13.48% year over year. The company's corn business focuses on the domestic market. It has formed mature R&D and breeding teams in the three regions of North East China, Huanghuaihai, and Southwest China. The seed promotion network covers all major ecological zones across the country. The company expects the cultivation and promotion area of the corn seed industry to increase year-on-year during the 2024 planting season, and the increase is expected to reach 15 to 20%.
In terms of genetically modified traits, the company's 4 corn products have obtained agricultural genetically-modified biosafety certificates (production and application). They have good insect resistance and outstanding glyphosate resistance. The company has received advance payment for license fees for some genetically-modified seed traits. The overall characteristic fee is about 8-10 yuan/mu (there are preferential strategies according to different circumstances). We believe that the commercial application of genetically modified corn seeds has begun. The company has a leading layout in genetically modified technology and is rich in variety reserves. It is expected that in the era of application of new technology, the scale of the seed industry will be further expanded to create a new growth curve for the company.
Profit forecast: We expect the company's EPS to reach 0.03/0.29/0.29 yuan in 2024/25/26. We believe that the company's genetically-modified technology is leading, and the company's breeding industry is expected to become a new performance growth point in the context of domestic commercialization of genetically-modified corn; the company's feed base is solid; the pig cycle in the second half of 2024 is expected to drive the company's pig performance growth and maintain a “buy” rating.
Risk warning: risk of fluctuations in feed raw material prices; risk of major epidemics and natural disasters; risk of changes in genetically-modified policies; risk of uncertainty in seed industry development and promotion