Events:

The company released its semi-annual report for 2022: 2022H1's revenue was 965 million yuan, an increase of 42.46% over the same period last year; its net profit was 30.4786 million yuan, compared with-9.4668 million yuan in the same period last year. 2022Q2's revenue was 525 million yuan, an increase of 36.93% over the same period last year, and its net profit was 10 million yuan, compared with-7 million yuan in the same period last year.

Main points of investment:

Independent research and development varieties perform well and turn losses into profits compared with the same period last year.

The market performance of the variety independently developed by the company is excellent, and the sales volume of seeds at home and abroad has increased compared with the same period last year. The revenue from seed sales was 551 million yuan, an increase of 60.65% over the same period last year, and sales increased by 67.25% over the same period last year. Of this total, the income from rice seeds was 392 million yuan, an increase of 37.05% over the same period last year, and sales increased by 41.43% over the same period last year. The company's gross profit margin on sales was 20.74%, down 0.94 pct from the same period last year; the expense rate during the period was 16.82%, down 7.60pct from the same period last year, of which the management expense rate was 6.06%, down 6.83pct from the same period last year, mainly due to the employee stock ownership plan amortization of 10.5518 million yuan, a decrease of 16.8757 million yuan over the same period last year. Affected by the decline in the expense rate during the period, the company's net profit rate on sales was 3.16%, an increase of 5.02pct over the same period last year.

The company actively lays out the whole industry chain to empower the main industry of seeds.

In terms of brand grain, the company has built brand grain production bases in Anhui, Sichuan and other places, and has established cooperative relations with more than 20 large grain processing enterprises, such as Yihai Kerry and Guangzhou Grain Group. In the aspect of order agriculture, the company cooperates with national well-known dairy companies such as Guangming Animal Husbandry, Modern Animal Husbandry and Yantang Dairy to create silage order agriculture model. In terms of special grain supply for wine, the company relies on high-quality soft wheat Quanmai 725 to build a special wheat production base for brewing.

Earnings forecast, valuation and rating

We estimate that the company's operating income from 2022 to 2024 will be 37.55 yuan 51.08 / 6.457 billion yuan respectively, with a growth rate of 48.94%, 36.05% and 26.41%, respectively, and the net profit from the home will be 2.52 cusp / 412 million yuan, respectively, with a growth rate of 48.82%, 11.97% and 46.40%, respectively, and the corresponding PE will be 44x/39x/27x. Refer to the average valuation of the comparable company, and consider that the company is expected to overtake in the corner with Syngenta, give a valuation premium, give 23 years 40x PE, the target price is 18 yuan, maintain the "buy" rating.

Risk hint: food price fluctuation risk; order agricultural promotion is not as expected