\u3000\u3 China Vanke Co.Ltd(000002) 041 Shandong Denghai Seeds Co.Ltd(002041) )
Event: the company issued an announcement on the 2021 annual performance express.
Key investment points:
The company’s performance met expectations and Q4 performed well. According to the preliminary accounting results, the company is expected to realize a total operating revenue of 101 million yuan in 2021, an increase of 22.20% over the same period of last year; The operating profit was 254 million yuan, an increase of 246.51% over the same period last year; The total profit was 240 million yuan, a year-on-year increase of 247.01%; The net profit attributable to the parent company was 233 million yuan, a year-on-year increase of 128.33%; The net profit attributable to the parent company after deduction was 184 million yuan, with a year-on-year increase of 292.94%. It is estimated that the basic earnings per share in 2021 will be 0.26 yuan and the weighted average return on net assets will be 7.79%. Benefiting from the rise in the price of commercial grain corn and the improvement of farmers’ enthusiasm for growing grain, the company’s main business corn seeds ushered in the stage of simultaneous increase in volume and price in 2021. 2021q4 company’s performance is even brighter. It has achieved rapid growth under a high base. It is expected to achieve a single quarter operating revenue of 589 million yuan, a year-on-year increase of 25.18%; The net profit attributable to the parent company was 116 million yuan, a year-on-year increase of 166.18%.
The demand of corn downstream is rigid, and the price continues to rise. As the main food crop in China, the price of corn has risen rapidly since 2020 due to the expansion of feed demand in the downstream and the reduction of China’s inventory. After the shock consolidation in the second half of 2021, corn prices have rebounded again recently catalyzed by the situation in Russia and Ukraine. As of March 24, 2022, the average spot price of corn was 283137 yuan / ton, an increase of 97 yuan / ton in 2022. The demand for corn has not reached a certain peak in the short term, and the demand for pigs has not yet reached a certain level. It is estimated that from 2022 to 2023, China’s pig production capacity will be gradually eliminated, and the demand for feed corn will be gradually reduced. In the long run, the upward space of corn price is limited. On the other hand, some Chinese enterprises have obtained the biosafety certificate of genetically modified corn. In order to realize the scientific and technological self-reliance of China’s seed industry, the application of biological breeding technology is the general trend. After the commercialization of biological breeding technology in China, the overall profitability of the industry is expected to be further improved.
The company focuses on corn seeds, and wheat and rice go hand in hand. In 2020, the China Seed Association selected 20 “Hall of honor” maize varieties based on the promotion area in a single year and the cumulative promotion area. Five maize varieties Shandong Denghai Seeds Co.Ltd(002041) of Yedan No. 2, Yedan No. 12, Yedan No. 13, Yedan No. 19 and Denghai 605 were selected, which is the unit with the most varieties selected. At the 29th Beijing seed industry conference held in October 2021, 8 Maize Inbred lines selected by the company were selected as “national outstanding contribution maize inbred lines”, accounting for 14.55%. The company has a wide variety of corn seeds, stable market share and strong competitiveness. Benefiting from the rise of grain prices and the improvement of the landscape of the seed industry chain, the sales of wheat seeds and rice seeds of the company in 2021 increased compared with the same period of last year. In terms of biological breeding technology, the company cooperates with Beijing Dabeinong Technology Group Co.Ltd(002385) in genetically modified corn seeds, which is expected to seize the development opportunity of commercialization of biological breeding technology.
Maintain the company’s “overweight” rating. The company’s main business ushered in a good situation of simultaneous increase in volume and price. Considering the strong demand of the company in the sales season of 2021q4, the company raised its EPS from 2021 to 2023 to 0.27/0.34/0.43 yuan / share (originally predicted that the company’s EPS from 2021 to 2023 was 0.22/0.23/0.25 yuan / share). According to the situation of comparable listed companies in the seed industry, the company is given a valuation of 63x P / E ratio in 2022. Considering the improvement of the prosperity of the industry and the expectation of relevant policies, the company is given a certain valuation premium to maintain the “overweight” rating of the company.
Risk warning: the risk of sharp fluctuation of product price; The commercialization of biological breeding technology in China is less than expected.
