\u3000\u30 China Baoan Group Co.Ltd(000009) 98 Yuan Longping High-Tech Agriculture Co.Ltd(000998) )
Event: the company disclosed the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a total operating revenue of 3.503 billion yuan, yoy + 6.47%, and a net profit attributable to the parent company of 624474 million yuan, yoy-46.12%. In the first quarter of 2022, the company realized a total operating revenue of 905 million yuan, yoy + 6.48%, and a net profit attributable to the parent company of 544585 million yuan, yoy + 34.38%.
The cost of corn seed production has increased, and the effect of rice destocking is obvious. The revenue growth of the company in 21 years mainly came from the comprehensive agricultural services and other seed sectors, with a year-on-year increase of 62.42% to 632 million yuan. From the perspective of the company’s main business, in the past 21 years, the company achieved sales revenue of 1.015 billion yuan for corn seeds, yoy + 2.74%, and 1.304 billion yuan for rice seeds, yoy-6.19%. Subject to the upward impact of seed costs, the company’s gross profit margin of corn seeds fell by 8.44 PCTs to 31.21% and that of rice seeds fell slightly by 2.46 PCTs to 29.38% in the past 21 years. The company has gradually integrated its rice business and established Yahua rice business department to strengthen internal coordination. At the same time, it has continuously improved its inventory status and concentrated on clearing and destocking small rice varieties, which has achieved remarkable results. In the past 21 years, the company made a total provision of 444 million yuan for inventory falling price, including 327 million yuan for rice seeds. By the end of the 21st century, the company’s rice seed inventory had decreased by 32.74% year-on-year, and the overall stock to sales ratio was 81.68%, a decrease of 40.35 PCTs. The company has gradually improved its internal management coordination ability, cleaned up its inventory and carried it light, which is conducive to the company to improve its own operation efficiency and further enhance the competitiveness of the industry.
Maintain the construction of breeding R & D system and continuously expand the scale of varieties. The company continued to maintain its R & D investment in breeding, with a R & D investment of 275 million yuan in 21 years, accounting for 7.86% of its revenue. By the end of 2021, the company had built 44 breeding stations in 7 countries including China, the United States and Pakistan, with a total area of nearly 12000 mu. In terms of rice, the company has formed a mature commercial rice breeding system, covering both China and international markets. In terms of maize, the company actively carried out International Maize Germplasm Resources Exchange and international shuttle breeding, and made phased progress. In 2021, the company obtained 66 new plant variety rights, including 39 for rice and 18 for corn, ranking the leading level in the industry. In January 22, the company announced that 88 new rice varieties, 50 new corn varieties and 1 new cotton variety had passed the national examination and approval. With the company’s mature breeding R & D system, the company’s variety scale continues to expand, providing strong variety support for the company’s sustainable development.
The layout of biological breeding continues to advance, and the transgenic business is worth looking forward to. The company continues to promote the layout of biological breeding sector, and has formed a mature and stable R & D layout in the R & D of genetically modified corn, gene editing rice and other aspects. In terms of genetically modified corn, the company takes Hangzhou Ruifeng and Longping biology as the double carriages. So far, two genetically modified corn products, Ruifeng 125 and Zhejiang Ruifeng 8, have been approved with biosafety certificates, and the research and development of genetically modified corn products of Longping biology is also progressing steadily. In terms of rice, the company is actively carrying out the initial research and development of gene editing. By the end of the 21st century, the company has created 24 new germplasm such as low cadmium rice, and 5 pilot trials have been approved by the Ministry of agriculture and rural areas. The company continues to layout in the biological breeding sector, and the corn transgenic technology and variety reserve are at the leading level in the industry. It is expected to fully enjoy the market growth dividend after the commercialization of transgenic in the future.
Profit forecast and investment rating of the company: it is estimated that the net profit attributable to the parent company in 22-24 years is 201, 348 and 489 million yuan respectively, EPS is 0.15, 0.26 and 0.37 yuan, and PE value is 100.95, 58.34 and 41.45 times. We are optimistic about the strong breeding R & D system and variety advantages of the company as the leader of China’s seed industry, which is expected to drive the high-quality development of the seed industry, and the transgenic business is also worth looking forward to in the future. Maintain a “strongly recommended” rating.
Risk tip: the implementation of GM policy is less than expected, and the company’s product R & D is less than expected
