Beijing Dabeinong Technology Group Co.Ltd(002385) (002385)
Event overview
On December 27, 2021, the Department of science, technology and education of the Ministry of agriculture and rural areas publicized the catalogue of 10 plant varieties to be approved for issuing safety certificates of agricultural genetically modified organisms in accordance with Article 15 of the provisions on the naming of agricultural plant varieties. The publicity period is 15 working days, from December 27, 2021 to January 17, 2022, The catalogue contains the corn character product dbn3601t of Beijing Beijing Dabeinong Technology Group Co.Ltd(002385) Biotechnology Co., Ltd., the holding subsidiary of the company.
Analysis and judgment:
It is proposed to obtain the safety certificate of genetically modified organisms, and its leading position is stable
The Department of science and education of the Ministry of agriculture and rural areas issued the safety certificate of genetically modified organisms twice on December 30, 2019 and June 23, 2020, including the company’s genetically modified corn variety dbn9936 / dbn9858 / dbn9501. After the publicity of the safety certificate of genetically modified organisms, the shape of the company’s genetically modified corn added dbn3601t, and its leading position was further consolidated. The corn trait product dbn3601t to be approved is a new upgraded trait product of dbn9936 and dbn9501. On the one hand, it can further enrich the company’s genetically modified corn trait product matrix and provide customers with the choice of multiple traits; On the other hand, it further highlights the leading position of the company’s transgenic strength, and is expected to open the company’s growth space with the opportunity of China’s transgenic commercialization.
GM commercialization has entered the countdown stage, and the company is expected to take the lead in benefiting
On November 12, 2021, The Ministry of agriculture and rural areas also issued the decision of the Ministry of agriculture and rural areas on Amending the administrative measures for safety evaluation of agricultural genetically modified organisms (Draft for comments) and the decision of the Ministry of agriculture and rural areas on amending some seed industry regulations (Draft for comments) , all aspects of GM commercialization have been systematically revised to further clarify the approval methods of GM varieties and supporting production and operation license management methods. We believe that the commercialization will enter the countdown stage after the approval methods of genetically modified varieties and relevant supporting policies are issued. The commercialization of genetically modified organisms is a milestone in the development of China’s seed industry. On the one hand, the threshold of competition in the seed industry will be greatly raised, the industry competition pattern will be optimized, and the market share of high-quality leading enterprises will be rapidly increased; On the other hand, the added value of genetically modified seeds is high, and the planting income is significantly higher than that of ordinary hybrids. The rising sales price of genetically modified seeds promotes the expansion of the industry. As the leader of transgenic in China, the company has obvious first mover advantage and is expected to achieve a rapid increase in market share.
Pig stocks remained high and the demand for feed business continued to improve
Feed industry is the basic industry of the company, providing stable cash flow for the development of the company. In 2019, affected by the swine plague in Africa, the pig production capacity of the pig breeding industry was greatly reduced. The contradiction between supply and demand of pigs supported the pig price to remain high, and the average profit per head once exceeded 2500 yuan. The enthusiasm of the industry to supplement the column was greatly improved, driving the rapid recovery of pig production capacity. With the rapid release of pig production capacity, the pig stock will remain high in the next 1-2 years, driving the feed demand for the better. As the leader of pig feed in China, the company’s high-end feed accounts for more than 45%. Under the background of the recovery of pig stock, the sales growth rate is obvious. The year-on-year growth rate of front-end feed sales in the first three quarters is about more than 30%, and the year-on-year growth rate of batch is doubled.
Investment advice
Pig stocks remained high, driving feed demand for the better. At the same time, China’s transgenic commercialization has entered the countdown stage. As the leader of China’s transgenic seed industry, the company has obvious first mover advantage and is expected to quickly seize the market share. Considering that pig prices fell more than expected, We lowered the company’s revenue from 2021 to 2022 to 32.479/355.58 (the previous value was 33.725/42.273 billion yuan respectively), and correspondingly reduced the net profit attributable to the parent company to 167 / 779 million yuan (the previous value is RMB 2.764 billion and RMB 3.258 billion respectively), and it is estimated that in 2023, the company’s revenue will be RMB 39.785 billion and the net profit attributable to the parent company will be RMB 1.91 billion. To sum up, we expect that the company’s EPS will be RMB 0.04/0.19/0.46 respectively from 2021 to 2023, the closing price will be RMB 10.31 as of December 27, 2021, and the corresponding PE will be 256 / 55 / 22x respectively, maintaining the “buy” rating.
Risk statement
The commercialization of GM is less than expected, the promotion of varieties is less than expected, and the policy is disturbed.
