Event: The company announced its 2023 three-quarter report. The company achieved revenue of 23.931 billion yuan, yoy 8.31%, net profit of 908 million yuan, and yoy -174.45% in the first three quarters of 2023. Among them, the third quarter achieved revenue of 8.265 billion yuan, yoy -5.02%, net profit of 134 million yuan, and yoy -174.84%.
Revenue is steady, and the slump in the farming market is dragging down performance. The company achieved revenue of 23.931 billion yuan in the first three quarters, of which revenue from the feed sector was 17.960 billion yuan (yoy 11.9%), pig farming sector revenue was 4.134 billion yuan (yoy 26.4%), and revenue from the seed industry sector was 343 million yuan (yoy 63.7%). Revenue from the main business segments all achieved double-digit growth. The slump in pig prices since this year has affected the company's performance. The company lost 9100 million yuan in net profit in the first three quarters. Looking at the breakdown, the feed, breeding and seed industries made profits of 600 million yuan, -9 million yuan, and -0.3 billion yuan respectively, while other sectors, headquarters expenses, and accruals of 5-6 billion yuan respectively.
The sales volume of feed pigs has increased steadily, and we are waiting for the cycle to improve. In the first three quarters of 23 years, the company exported 4.3 million tons of feed, an increase of 12% over the previous year, of which the sales volume of pig feed was 3.4 million tons, an increase of 18% over the previous year. The company relied on formula optimization and raw material-side revenue to achieve a 1 percentage point increase in gross margin of pork feed over the same period last year. Ruminants and aquatic products achieved sales of 500,000 tons and 300,000 tons, respectively, with year-on-year changes of 11% and -20%, respectively. In terms of pig breeding, in the first three quarters, the company's shareholding companies listed a total of 4.16 million heads, an increase of 36% over the previous year; 230,000 basic sows were kept and 90,000 were backed up. The number of pigs released for the whole year is expected to be around 5.5 million, with a steady increase in the number released. Overall, this year's pig, beef cattle, and common fish markets have all been relatively sluggish, putting some pressure on the company's feed and pig breeding business. We believe that the slump in the market is expected to lead to a gradual elimination of inventories and production capacity. It is expected that next year the farming market will gradually improve, which is beneficial to the continuous improvement of the company's profitability.
The seed industry is driven by both domestic and foreign countries, and genetically modified genes are poised to develop. The company's seed industry sector performed well in the first three quarters, with total seed sales volume of 13.7 million kg, an increase of 65% over the previous year, including 4 million kg of corn seeds and 4.3 million kg of rice seeds. In terms of genetically modified genes, on October 17, the Ministry of Agriculture and Rural Affairs announced the genetically modified soybean and corn varieties that passed the initial review of the variety certification. The company has a clear advantage on the trait side. Of the 37 corn varieties, 22 used the company's transformers, and 5 of the 14 soybean varieties used the company's transformers. In overseas markets, the Brazilian subsidiary of Dabeinong Biotech obtained a Brazilian biosafety license, and the combined incident of DBN9004 × DBN8002, a genetically modified herbicide-resistant insect-resistant soybean developed by Dabeinong Biotech, passed the safety evaluation review in Argentina and was officially approved for cultivation in Argentina. The company's layout in the field of genetically-modified genes is progressing steadily both domestically and overseas, and is expected to contribute to objective performance growth for the company after commercial implementation in the future.
Company profit forecast and investment rating: We are optimistic about the steady development of the company's basic feed farming business, and the performance is expected to gradually improve in the market farming market in the future. As a strategic sector that the company has continued to lay out for many years, the GM business is about to enter a substantial implementation stage, which is expected to open up space for the company's long-term growth. The company's net profit for 2023-2025 is estimated to be -3.64, 5.34, and 1,292 billion yuan respectively, EPS is -0.09, 0.12, and 0.28 yuan, and PE values are -78, 58, and 24 times. Maintain a “Highly Recommended” rating.
Risk warning: Fluctuations in pig prices, changes in raw material costs, companies falling short of expectations, etc.