\u3000\u3 China Vanke Co.Ltd(000002) 041 Shandong Denghai Seeds Co.Ltd(002041) )
Event: the company recently released its 2021 annual report. In 2021, it achieved a revenue of 1.1 billion yuan, an increase of 22.2% at the same time; The net profit attributable to the parent company was 232 million yuan, an increase of 128.33% at the same time; The basic earnings per share is 0.26 yuan. In the fourth quarter alone, the revenue was 588 million yuan, an increase of 24.53%; The net profit attributable to the parent company was 116 million yuan, an increase of 166.27% at the same time. We believe that the performance slightly exceeds the market expectation, and the comments are as follows:
Corn seed volume and profit increased, driving the performance to increase significantly. In 2021, the company’s corn seed business achieved a revenue of 978 million yuan, accounting for 88.89% of the total revenue, an increase of 24.66% at the same time; The gross profit margin was 38.15%, an increase of 8.61 percentage points over the previous year. There are two main reasons for the increase in revenue: 1) benefiting from the recovery of downstream demand and the strong competitiveness of its own products, the sales volume of Denghai and Xianyu series products increased significantly compared with the same period of last year; 2) The rise in corn prices was transmitted to seeds, resulting in an increase in product prices over the same period last year. The increase in gross profit margin was mainly due to the fact that the increase in corn seed price exceeded the increase in cost.
Many new varieties have been approved by the state, and the advantage of variety combination has been enhanced. In 2021, 41 new maize varieties independently developed by the company (including 24 new varieties of Denghai series such as “Denghai 1925”, 5 new varieties of Xianyu series such as “Xianyu 1970” and 12 new varieties such as “Hangyan 8066”) were approved by the state. In addition, two new wheat varieties (Denghai 202 and Denghai 216) were approved by the state and Shandong Province respectively. We believe that with the approval and listing of new varieties, the product matrix will be effectively expanded, and the variety combination advantage of the company in the seed industry will be further enhanced in the future.
Contract liabilities increased by more than 50% at the same time, and the performance is expected to continue to increase high in Q1 quarter of 22 years. At the end of 2021, the company’s contractual liabilities were 491 million yuan, an increase of 52.96% at the same time; The contract liabilities reflect the amount generated by the distributor’s reservation of the company’s seed products. The growth of contract liabilities will lay a good foundation for the growth of performance in the next year.
The company is one of the core leaders in China’s corn seed industry. It has obvious advantages in germplasm resources and is given a buy rating. The company is the core leader of China’s corn seed industry, and its market share has long ranked among the top two in the industry. The company has accumulated rich germplasm resources, with obvious advantages in resources and varieties. In 2020, among more than 16000 maize varieties promoted in recent 40 years, China Seed Association selected 20 “honor Palace” maize varieties based on the promotion area in a single year and the cumulative promotion area. The five maize varieties bred by the company, Yedan 2, Yedan 12, Yedan 13, Yedan 19 and Denghai 605, were selected, which is the unit with the most varieties selected. In October 2021, 478, YE107, dh382, DH351, ye52106, 8001, 515 and dh65232 maize inbred lines selected by the company were selected as the “national outstanding contribution maize inbred lines” issued by the 29th Beijing seed industry conference, accounting for 14.55% of the total. We are optimistic about the company’s long-term competitive advantage in corn seed business and give a “overweight” rating. It is estimated that the net profit attributable to the parent company in the year 22 / 23 / 24 will be RMB 318 / 433 / 502 million. According to the 24-year performance, 50 times PE is given, and the target price in the next 12 months is 28.52 yuan, which is nearly 30% of the space from the current price.
Risk tip: the increase of product sales and price is less than expected
