Incident: 1) The company released three quarterly reports and achieved revenue of 2.055 billion yuan, +32.26% year over year; net profit to mother -0.084 billion yuan, -892.84% year over year. 2) The company released the 2023-2024 business year operating report. The total revenue for the 23-24 business year was 4.489 billion yuan, +30.17% over the same period last year.

Seed sales increased year-on-year in the previous quarter. The globalization+multi-variety layout showed that in the 23-24 business year (August 1, 23 to July 31, 24), the company's three major seed sales revenue totaled 2.66 billion yuan, +24.3% year over year; total seed sales volume was 0.192 million tons, +33.4% year over year, partly due to increased seed exports. Look at the segmented categories,

Rice seeds: sales revenue of 1.77 billion yuan, +23.3% year over year, sales volume 0.059 million tons, +38.7% year over year; 24H1 and its holding subsidiaries selected 4 new nationally approved hybrid rice varieties and added 19 new provincial approved hybrid rice varieties. As of the end of June, they had a total of 510 rice varieties.

Corn seeds: sales revenue of 0.46 billion yuan, +27.6% year over year, sales volume 0.024 million tons, +20.5% year over year; 24H1 added 12 new varieties of corn approved by the province, with a total of 124 corn seeds as of the end of June.

Wheat seeds: sales revenue of 0.42 billion yuan, +25.3% year over year, sales volume 0.109 million tons, +33.9% year over year; 24H1 added 5 new wheat varieties approved by the province, and had a total of 24 wheat varieties by the end of June.

Furthermore, in the 23-24 business year, the company achieved 1.05 billion yuan in food crop revenue, +78.9% year-on-year. On the basis of strengthening the core seed industry, the company cooperates with brands such as grain processing enterprises and breeding enterprises in the industrial chain to order agricultural business. The cooperative brands include Junlebao, Guangming Animal Husbandry, Gujing Gongjiu, etc., to promote seed sales while cultivating a second growth curve.

Pre-sale of seeds for the new season began, and the 24Q3 contract debt increased by 0.87 billion. Seed sales season is strong. Most farmers promoted pre-sale of new season seeds in Q3; the company also held the Rice Division's 2024-2025 National Marketing Summit in September. In the 24Q3 quarter, the company achieved revenue of 0.64 billion yuan, +36.0%; the contract debt amount for the single quarter increased by 0.87 billion yuan, and the contract debt balance by the end of the third quarter was 1.68 billion yuan, a slight increase over the previous year, laying a solid foundation for the growth of seed industry sales in the new quarter.

Backed by high-quality resources from major shareholders and approved genetically-modified corn varieties, the company continued to increase investment in scientific research. R&D expenses for the first three quarters of 24 were 0.06 billion yuan, +20.1% over the same period last year. In the field of biological breeding, as an important member of Syngenta's seed industry, the company is actively developing biological breeding technology research and resource reserves; three genetically-modified corn varieties, including Rongyu 8K, which were co-selected, were officially approved by the Ministry of Agriculture and Rural Affairs in September '24. In addition, the seed industry sector of Syngenta, the largest shareholder of the company, has assets such as China Seed Technology, Sanbei Seed Industry, and Golden Rice Seed Industry; it applied the whole genome selection technology system to commercial breeding for the first time in China, and achieved seed industry revenue of 30.6 billion yuan in 2023. We believe that the company relies on high-quality resources from major shareholders and has a clear path for variety research and development and regional expansion, which is expected to accelerate the development and commercialization of genetically modified varieties.

Investment advice: The company's seed industry expanded smoothly, contract agriculture increased, and the increase in contract liabilities in the third quarter provided support for subsequent results; we expect the company's 24-26 revenue to be 48.00/ 58.75/ 6.76 billion yuan, and net profit to mother of 3.07/ 3.47/ 0.44 billion yuan. I am optimistic that the company's genetically-modified layout will enable rapid development in the later stages and maintain a “buy” rating.

Risk warning: risk of price fluctuations, risk of policy changes, risk of contract farming business expansion, risk of GM promotion falling short of expectations.