Incident: The company released its 2024 mid-year report. 2024H1 achieved operating income of 1.411 billion yuan, +30.62% YoY; net profit to mother -0.022 billion yuan, -156.41% YoY. Among them, 2024Q2 achieved operating income of 0.738 billion yuan, +59.50% YoY, +9.61% month-on-month; net profit to mother -0.04 billion yuan, -593.43% YoY, and -325.33% month-on-month.

1. Exports drive the growth of the seed industry, and the multi-variety layout continues to improve

In 2024H1, the company achieved sales revenue of 0.636 billion yuan from various crop seeds, an increase of 10.36% over the previous year, mainly due to increased exports of rice seeds; looking at the seed segment,? Rice seeds: achieved revenue of 0.381 billion yuan, +14.09% year-on-year, gross profit margin of 31.19%. In the first half of the year, 4 hybrid rice varieties were added through autonomous/cooperative breeding methods, and 19 new hybrid rice varieties were added under provincial inspection. As of 2024H1, there were 510 rice varieties (307 under national inspection).

Corn seeds: achieved revenue of 0.119 billion yuan, -9.93% year-on-year, gross profit margin of 30.68%. In the first half of the year, 12 varieties of corn were added under provincial inspection. As of 2024H1, there were 124 corn varieties (31 under national inspection).

Wheat seeds: achieved sales revenue of 0.06 billion yuan, -69.36% year-on-year, gross profit margin of 7.96%. Five new varieties of wheat were added in the first half of the year. As of 2024H1, there were 24 wheat varieties.

2. Effective collaboration in the core seed industry, showing results in contract farming cultivation

2024H1 achieved revenue of 0.774 billion yuan from the non-seed business, an increase of 53.79%; of these, the revenue from the food order business was 0.48 billion yuan, a significant increase of 111.96% over the previous year. As large-scale land cultivation progresses, on the basis of strengthening the core seed industry, the company explores and innovates the “variety+brand+capital” model, cooperates with brands such as grain processing enterprises and breeding enterprises in the industrial chain to develop custom agricultural businesses such as special wheat, high-quality rice, and silage corn. The cooperative brands include Junlebao, Guangming Animal Husbandry, Gujing Gongjiu, Yingchao Gongjiu, etc., to cultivate a new growth curve while promoting seed sales.

3. Maintain high R&D investment and obtain approval for genetically-modified corn varieties

The company invested 0.038 billion yuan in 2024H1 R&D, +19.47% year-on-year, and the R&D cost ratio was 2.71%. In the field of biological breeding, Quanyin Hi-Tech, as an important member of the Xianzhengda seed industry, actively carries out research and development of biological breeding technology and reserves relevant resources. In March 2024, three genetically-modified corn varieties, including Rongyu 8K, selected by Quanyin Hi-Tech and Huludao Agricultural New Variety Technology Development Co., Ltd. were initially reviewed and publicized by the Ministry of Agriculture and Rural Affairs. We believe that the company's variety and regional expansion path are clear, and the layout of genetically modified corn varieties is expected to add support to the development of the company's corn seed industry.

Investment suggestions: The company's seed industry is expanding smoothly, contract farming is increasing, and the 24H1 contract debt is 0.811 billion yuan, an increase of 0.292 billion yuan over the previous year to support subsequent performance release; 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; the company is deeply involved in the seed industry, and the genetic-modified layout is expected to help develop rapidly 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.