\u3000\u30 Jinzai Food Group Co.Ltd(003000) 87 Winall Hi-Tech Seed Co.Ltd(300087) )
Key investment points
Performance summary: in the first quarter of 2022, the company achieved an operating revenue of 440 million yuan, a year-on-year increase of 49.7%, and the net profit attributable to the parent was 20.416 million yuan, a year-on-year increase of 1085.5%. After deduction, the net profit attributable to the parent was 17.315 million yuan, a year-on-year increase of 550%.
Comments: the company’s performance growth is mainly due to the continuous growth of seed business. The market performance of hybrid rice, hybrid corn and other varieties is good, and the sales volume is increased year-on-year. According to customs data, China imported 28.35 million tons of corn in 2021, a year-on-year increase of 151%. The overall grain import was 65.376 million tons, a year-on-year increase of 82.7%; The import volume was US $20.07 billion, an increase of 110%. According to the data from January to February 2022, grain imports were 10.821 million tons, a year-on-year decrease of 1.1%; The import volume reached US $3.73 billion, an increase of 21.9%. The state attaches great importance to food security and farmers have high planting enthusiasm. The Ministry of agriculture and rural areas and the Ministry of finance have made clear the policy support for the key work of food production in 2022, which refers to the stable implementation of cultivated land fertility protection subsidies and the issuance of one-time subsidies to farmers who actually grow grain, so as to alleviate the impact of increased expenditure caused by the rise of agricultural materials prices, so that the company’s seeds are high-quality and its long-term performance will be better in the future.
The work related to genetically modified seeds has been smoothly promoted. If commercialization can be successfully realized, the market space will be broad, the development of seed industry will be gradually standardized, and the development environment of seed enterprises with real R & D strength will be optimized. The No. 1 central document issued by the CPC Central Committee and the State Council clearly puts forward the importance of food security and seed security; Similarly, it was also mentioned in the three clear tasks for seed issues in the central economic work conference to carry out seed source “neck” technology research, and determined to fight a turnaround. In July 2021, the meeting of the central Deep Reform Commission considered and adopted the action plan for the revitalization of the seed industry, emphasizing the importance of food security. In order to implement the relevant requirements, the office of the National Crop Variety Approval Committee organized to modify the national corn and rice variety approval standards, increase the consistency and authenticity requirements in the basic conditions of corn and rice, and adjust the number of detection differences. In addition, China’s GM will usher in a huge market of standardized and benign competition. If industrialization can be realized in the future, the generated market space will be divided among seeds, farmers and land, Winall Hi-Tech Seed Co.Ltd(300087) as a high-quality high-tech seed industry enterprise with “integration of breeding and promotion”, it will benefit from it. According to the evaluation data of China national audit, the rice quality of Quanyin variety is excellent (mainly at level 1-2 and generally at Level 3), while other indicators are also leading the industry, which is in line with the upgrading trend of residents’ consumption habits in the future. The market share is expected to increase to 20%, further driving the growth of sales revenue of the company’s rice business. At the same time, the company pays attention to R & D and innovation and promotes product iteration. In 2021, the company and its holding subsidiaries added or realized 97 multi regional national approved varieties through independent or cooperative breeding, including 92 rice and 5 corn.
The climate and the uncertainty of the international situation brought about by the Russian Ukrainian war make the global food price high. The country attaches great importance to food security, farmers have high planting enthusiasm, and the seed demand increases accordingly. Due to the impact of geographical conflict, the area of spring sowing in Ukraine has decreased, mainly including corn, barley and other crops. According to the latest news released by the Minister of agriculture of Ukraine, its grain output may be reduced by about 54.6% in 2022. In terms of rice, with the approval of the State Council, the minimum purchase prices of early indica rice (third-class), medium and late indica rice and japonica rice produced in 2022 are 124 yuan, 129 yuan and 131 yuan per 50kg respectively, up 2 yuan, 1 yuan and 1 yuan respectively, which will be further increased on the basis of 2021. The global corn price trend is still upward. At the end of the 21st century, La Nina phenomenon appeared for the second consecutive year, which is expected to exacerbate rainfall and drought around the world, and then affect the output of grain crops. As a high-tech seed industry enterprise with “integration of breeding, propagation and promotion”, the company has layout in rice, corn, wheat and other fields, and its performance is expected to improve with the planting landscape.
Profit forecast and investment suggestions. It is estimated that the EPS from 2022 to 2024 will be 0.50 yuan, 0.67 yuan and 0.92 yuan respectively, and the corresponding PE will be 43 / 32 / 23 times respectively. Maintain the “buy” rating.
Risk tips: market competition may intensify, and the company’s product sales may not be as expected.
