\u3000\u3 China Vanke Co.Ltd(000002) 041 Shandong Denghai Seeds Co.Ltd(002041) )
China’s leading hybrid maize breeding and promotion integration enterprise was given a “buy” rating for the first time
The company is the first pilot enterprise to implement the integration of breeding, reproduction and promotion in China, focusing on the hybrid breeding of compact maize. Since 1972, the breeding of 146 generations of high-yield varieties has been carried out, and more than 100 high-yield compact maize hybrids have been developed, with a cumulative planting area of more than 1.3 billion mu. In the short term, the company’s performance is expected to benefit from the strong demand for seeds brought by the boom in the price of corn commercial grain. In the medium and long term, the company’s large single products are expected to further open up performance space as a high-quality receptor in the genetically modified seed market. Based on the above assumptions, we estimate that the company’s net profit attributable to the parent company from 2022 to 2024 will be RMB 326 / 437 / 493 million respectively, EPS will be RMB 0.37/0.50/0.56 respectively, and the corresponding PE of the current stock price will be 60.6/45.2/40.1 times respectively. The “buy” rating will be given for the first time.
The R & D strength is ahead of its peers, and the new seed method is implemented to escort the company’s scientific research and innovation
The company has been deeply engaged in the field of corn seed R & D for many years, and the number of approved corn varieties has significantly led other Chinese seed enterprises. The market share of large single products such as Denghai 605 and Denghai 618 is in the forefront of the industry. More than 30 derived inbred lines have been developed and more than 58 hybrids have been obtained. It is an important germplasm basis of Backbone Inbred Lines in Huang Huai Hai area. Since 2020, the seed industry revitalization policy has been issued intensively. Improving the intensity and level of intellectual property protection of the seed industry is the main theme of the current seed industry policy. Under the background of stricter variety approval standards, the industry concentration is expected to increase, and the market pattern is about to be reconstructed. The new seed law and a series of supporting documents were issued to escort the promotion of high-quality seed sources. The company is expected to continue to benefit from the dividend period of industry standard development and concentration improvement.
Corn seed demand ushered in an inflection point, which is expected to take advantage of GM commercialization to further open performance space
In terms of supply, the de stocking process of temporary storage corn in China has come to an end, the effective inventory of corn seeds is low, and the feed demand of corn is still high in the post breeding cycle. In addition, foreign supply disturbance factors continue, the supply of major corn exporting countries is also tight, and there is support for corn price and seed demand under the pressure of China’s guaranteed supply. In terms of commercialization of genetically modified seeds, the recipient varieties in suitable planting areas only need to carry out one-year production test to apply for biosafety certificate. The traditional high-quality local corn varieties will be the priority target receptor of the genetically modified trait development company and the important element to promote the formal implementation of commercial varieties. The company is expected to take advantage of the major high-quality single products to further improve the market share in the main corn planting areas.
Risk warning: weather and other natural disaster risks, seed production costs rise, and the R & D and promotion of new varieties are less than expected.
