\u3000\u30 China Baoan Group Co.Ltd(000009) 98 Yuan Longping High-Tech Agriculture Co.Ltd(000998) )
Large impairment, light pack and wait for the performance to pick up. In 2021, the company’s revenue increased by 6.47% year-on-year to RMB 3.503 billion; Net profit attributable to parent decreased by 46.12% year-on-year to 62.45 million yuan; The net profit loss after deducting non-profit was 450 million yuan, a year-on-year decrease of 836%. In 2022q1, the company’s revenue increased by 6.48% year-on-year to 905 million yuan; Net profit attributable to the parent company increased by 34.38% year-on-year to 54.46 million yuan; The net profit after deduction of non profits was – 50.79% year-on-year to 44.77 million yuan. In 2021, the company made provision for impairment of RMB 492 million and transferred Longping Jinyu Bio-Technology Co.Ltd(600201) income of RMB 416 million. The two items were basically hedged. In terms of important subsidiaries, Hunan Longping (rice) lost 200 million yuan, Hunan Yahua (rice) lost 43.13 million yuan, Anhui Longping (corn) lost 130 million yuan, Lianchuang seed industry (corn) made 120 million yuan, and Xuntian, deruite and sanruinongke all achieved good profits. We believe that after the impairment of the company’s rice and corn inventory in 2021, the inventory sales ratio reached 81.68% at the end of 2021, with a year-on-year decrease of 40.35%. The original inventory pressure is relieved, and the future performance is expected to pick up. In addition, the net cash flow from operating activities of the company in 2021 reached 1.369 billion yuan; Interest bearing liabilities decreased by 533 million yuan to further alleviate the financial pressure.
The focus of the company’s future performance growth is still the corn business. In terms of rice, the company achieved a revenue of 1.304 billion yuan in 2021, a slight decrease of 6.2% over the same period, and the gross profit margin was – 7.7% to 29.38% year-on-year; Considering the overall rise of grain prices and the establishment of rice Yahua business department, it is expected that the rice business of the company is expected to recover better in 2021 / 22 and 2022 / 23 planting seasons. In terms of corn, in 2021, the company achieved a revenue of 1.015 billion yuan, a slight increase of 2.73% year-on-year, and the gross profit margin was – 21.3% to 31.21% year-on-year; Corn seeds are in a period of rapid growth in performance. Except for some varieties in Longping, Anhui, the field performance is weak in 2021. Lianchuang and Xuntian have achieved good performance growth and are expected to continue to maintain the growth trend; If GM is implemented, the corn business may achieve rapid growth in step performance. In addition, the subsidiary Brazil Longping achieved a profit of 130 million yuan in 2021, which is expected to become a new growth point of the company’s performance in the future. The company’s Zhejiang Sunflower Great Health Limited Liability Company(300111) , millet, vegetables and other varieties basically grew steadily.
Maintain high investment in R & D, consolidate the leading position of seed industry with technical reserves. In terms of R & D, the company’s R & D expenses in 2021 increased by + 7.88% year-on-year to 208 million yuan, and the growth rate of R & D expenses was higher than that of revenue. By the end of 2021, the company had 451 R & D personnel, accounting for 17% of the total number of the company; In 2021, 159 new plant variety rights were applied for, maintaining the leading position in the industry. In terms of transgenic technology, the front end of the company’s gene innovation is guided by the joint-stock companies Hangzhou Ruifeng and Longping biology, and the back end is dominated by the Academy of corn Sciences and Lianchuang seed industry. If GM is implemented in the future, the company is expected to achieve better performance growth by virtue of its first mover advantage.
Risk tip: the risk of seed production caused by bad weather and the risk that the implementation of GM policy is less than expected.
Investment suggestion: China’s seed industry is a comprehensive leader and maintains the “buy” rating.
The company is expected to usher in the triple inflection point of industry, business and management, and its performance may meet the upward growth of high quality. It is estimated that the net profit attributable to the parent company in 22-24 years is 306 / 704 / 970 million yuan, corresponding to the current share price PE of 68.4 / 29.7 / 21.6x, maintaining the “buy” rating.
