The company profoundly creates genes and has accumulated rich experience in the Chinese market. The company was founded in 1999 and is in the early stages of creating new pesticides in China. Chairman Wang Xianquan at the time resolutely chose to return to China to start a business and participate in the industrialization of helping China create pesticides. Chairman Keban's background has established an atmosphere where the company attaches importance to research and development of new pesticides. The company has maintained a R&D rate of around 5% in recent years, while continuously establishing research cooperation with universities such as Nankai University and Central China Normal University to further enhance the company's technological innovation capabilities. Unlike the model of multinational companies with strong financial capabilities developing new compounds, the company excels at developing products suitable for the Chinese market based on the characteristics of domestic crops, weeds, and climate, and using differentiation to achieve the common development of old and new products.

The company has made multiple breakthroughs in the field of pesticide creation, and quinoxalone, quinoxalone, and quinoxolone have blossomed. The company's first pesticide, quinoxalone, was launched for sale in 2021. After obtaining domestic registration, the sales scale increased rapidly. In the future, with the gradual implementation of overseas registration and domestic expansion registration, quinoxalone is expected to further increase market space. The rice field plans to create the herbicide pyrazoquinoxalate to obtain a registration certificate in the second half of 2024, and phenylprofloxone is expected to obtain a registration certificate in the first half of 2025.

Pyrazoloquinoline has achieved a new breakthrough in HPPD herbicides, and phenylprometholone provides a new direction for compounding. On the basis of not increasing farmers' usage costs, the two innovative drugs targeted the “pain point” weeds in farmers' rice fields — chikanin and barnweed. At present, the company has conducted efficacy evaluation tests on two innovative drugs in major rice-growing countries such as Southeast Asia and America. Currently, the overall efficacy response is good. In the future, the company is expected to cooperate with overseas multinational companies to promote innovative drugs and is committed to serving rice fields around the world.

Consolidate the basic market of non-patented products, and generate growth through differentiated blending and promotion. By providing customers with more efficient and reliable solutions, the company has successfully promoted a number of formulation products and has 10 million mu of experience in promoting formulations. The company has the exclusive domestic registered products fluoropyrimidine, 2,4-butyric acid, and pyridoxide, and reused old medicines through blending. With the launch of the company's innovative drugs and the integration of small-volume star pesticides such as oxazidone and propyne fluoxamine, more formulation products can be blended in the future, which will play more role as a provider of plant protection solutions rather than simply as a manufacturer of pesticide raw materials. Furthermore, the company is actively exploring the solution of “integrated drug cultivation”. After commercialization and promotion of bio-breeding resistant herbicide-resistant crops, the company's imidazolinone herbicides are expected to have a “second spring”.

Investment suggestions: The company has profoundly created genes, has rich experience in formulation promotion, and continuously differentiates the development of pesticide products. Within the next two years, pyrazolone and phenoxolone will enter a period of rapid release and growth potential. We expect the company's revenue for 2024-26 to be 2.26, 2.53, 2.79 billion yuan, and net profit to mother of 0.015, 0.12, and 0.252 billion yuan, corresponding PE is 114X/14X/7X, respectively. Considering that the company's innovative drugs will bring about a high increase in performance in the next two years, we gave the company 20 times PE based on the 2025 results, corresponding to the company's target market value of 2.4 billion yuan within 6 months, and gave it a “buy” rating.

Risk warning: Product promotion falls short of expectations, profit forecasts and valuation models fall short of expectations, etc.