Shandong Denghai Seeds Co.Ltd(002041) (002041)
Key investment points:
The corn seed industry is at a low level of inventory, the demand boom continues, and the quantity and price of high-quality varieties rise at the same time.
At present, the pig price is still in the decline channel. We expect the Q4 pig price to stabilize and rebound. After the Spring Festival in 2022, the industry is expected to enter the accelerated de capacity stage, and the de capacity process may end in 2022q2-q3. Corn seed demand usually lags behind corn demand by one year, and the business cycle of seed demand is expected to last until 2023. Affected by natural disasters, the per unit yield of seed production in the industry decreased by 10-40% in 2021, and the industrial inventory remained low. Under the tight balance between supply and demand, high-quality maize seed varieties are expected to usher in a simultaneous rise in volume and price.
The approval method for genetically modified varieties was implemented, and the ceiling and concentration of the industry increased.
The approval scheme for genetically modified varieties has been implemented, and the relevant commercial varieties 23q4 are expected to be listed in large quantities. The unit price of genetically modified seeds in the United States is about twice that of non genetically modified seeds, and it takes us $136 million on average to develop a new trait, which takes 13.1 years and has high R & D barriers. In the next three years, the market space of corn seed terminal driven by China’s GM is expected to be 50 billion, and the leading enterprises are expected to enjoy the double dividend of industry expansion + market share increase.
The company is the leader of hybrid corn in China and the leader of high-yield corn in China.
Li Denghai, the actual controller of the company, is known as the “father of China’s compact hybrid corn”. The five generations of corn hybrids cultivated by the company under his leadership lead the development direction of China’s hybrid corn. In 2020, the company’s corn seed revenue ranked second in the industry (the first was Yuan Longping High-Tech Agriculture Co.Ltd(000998) ), the company’s operating revenue was 900 million yuan, a year-on-year increase of 9.42%, and the net profit attributable to the parent company was 102 million yuan, a year-on-year increase of 145.18%.
Profit forecast and rating.
After the implementation of transgenic and supporting variety right protection system, the space of corn seed industry was opened, and we raised the company’s profit forecast. It is estimated that the company’s operating revenue from 2021 to 2023 will be RMB 1.292/1.541/1.962 billion respectively, with a year-on-year increase of 43.43% / 19.29% / 27.32% respectively; The net profit attributable to the parent company was RMB 225 / 317 / 407 million respectively, with a year-on-year increase of 120.24% / 41.21% / 28.40%, EPS was RMB 0.26/0.36/0.46 respectively, three-year CAGR was 56.5%, and the corresponding PE was 102x / 72x / 56x respectively. The company is the leader of maize hybrids, and five generations of major varieties lead the road of high yield of Maize in China. Considering the absolute valuation method and relative valuation method, the target price range is expected to be 25.4-30.5 yuan, and the corresponding PE is 71-85x. It is still optimistic about the long-term development of the company, but considering that the company’s share price has risen to the target range, it is temporarily lowered to the “overweight” rating.
Risk statement
Seed reseller risk; Risk of goods rejection by peers; Corn price fluctuation risk
