The release of livestock and pig farming is accelerating, South American soybeans are rapidly advancing, and genetically modified corn will usher in a new era!

1. What is the company’s positioning?

The company adheres to the principle of science and technology and leads the industry in R&D investment. At the beginning of its establishment, the company identified "technological innovation" as the backbone of development and was committed to developing China's agricultural industry with high technology. Relying on domestic and foreign agricultural science and technology innovation resources, we aim at the development goal of “implementing the agricultural biotechnology innovation strategy and creating a world-class agricultural science and technology enterprise”. The company takes feed, animal health, and seed industries as the mainstay of its scientific and technological innovation industry, and uses biotechnology and information technology as means to form a domestically leading and internationally first-class enterprise through independent research and development, technology introduction, transformation of scientific and technological achievements, or industry-university-research cooperation. Technological innovation system. In 2018, R&D expenditure reached 494 million, ranking second among A-share agricultural listed companies in R&D expenditure, second only to Wen's Holdings.

2. What are the company’s advantages and spatial geometry in the field of transgenics?

1. What is the geometry of the industry space? If genetically modified corn begins to be commercialized, the corn seed market will accelerate its upgrade and expand significantly. Data from the Bureau of Statistics show that in 2017, my country’s corn sown area was 636 million acres. Assuming that the corn sown area remains at 600 million acres in a stable future, and based on a seed cost of 100 yuan/mu, my country’s future terminal market for genetically modified corn seeds will be There are 600 (100*6=600) billion yuan in space. Assuming that the ex-factory price is 60% of the terminal price, the market space for genetically modified corn seeds based on the ex-factory price is 36 billion yuan. Judging from the domestic competition landscape, currently only Dabeinong Biotechnology and Hangzhou Ruifeng Biotechnology have obtained safety certificates for the genetically modified corn incident. Even if other companies join in the future, compared with traditional breeding, the market competition pattern will be greatly optimized, mainly concentrated on a few leading companies in the seed industry. It is expected that in the era of genetically modified breeding, the market will be in an oligopoly competition pattern.

2. What is the company’s competitive advantage?

1) On the R&D side, the company has accumulated more than ten years in the field of genetically modified R&D and has now established a complete and strong R&D platform system (including the Key Laboratory of Crop Gene Resources and Biotechnology Breeding of the Ministry of Agriculture). It has an industry-leading technology R&D team and has formed multi-level cooperation with many universities, enterprises and institutes at home and abroad, giving the company strong GMO R&D capabilities.

2) On the product side, we have taken the lead in obtaining the safety certificates for the first batch of genetically modified corn incidents, and have obvious first-mover advantages. In addition, the company's products are internationally competitive. In 2019, Dabeinong received an official written notification from the Ministry of Production and Labor of the Argentine government. The genetically modified soybean transformation event DBN-09004-6 developed by Dabeinong Biotechnology Company received official planting approval from the Argentine government. license.

3) Rich product reserves. The company has made preparations for the commercialization of its first-generation products and has basically completed the planning and layout of the domestic market; it has also laid out a ten-year R&D plan (2015-2025) for second- and third-generation products and technological innovations in corn and soybeans.

3. Under the high profitability of breeding, the company’s breeding business has grown rapidly and ushered in a stage of high profit release.

On the one hand, the company began to acquire breeding pig companies in 2013, and began to accelerate the layout of breeding in the Northeast region in 2014. In 2016, it launched a large-scale pig farming business across the country, taking advantage of the downturn in the industry cycle to expand;

On the other hand, the company and Harbin Veterinary Research Institute jointly carry out the prevention and control of African swine fever, and have achieved good results. According to the slaughter data from November 2019 to January 2020, the average weight of fattened pigs It is above 130 kilograms, which fully demonstrates its effectiveness in preventing and controlling African swine fever. As of February 2020, the company has 100,000 breeding sows and more than 100,000 gilts, laying the foundation for its high growth in slaughter. We estimate that the company’s slaughter volume (including equity participation) will reach 2.5 million and 4 million heads respectively in 2020-2021.

Tianfeng Securities believes that, regardless of the increase in genetically modified business, the company is expected to achieve operating income of 195/252/32.8 billion yuan from 2019 to 2021, an increase of 1/29/30; and achieve net profit attributable to the parent company 6.8/29.0/4.15 billion yuan, a year-on-year increase of 35/324/43, corresponding to an EPS of 0.16/0.69/0.99 yuan, and a corresponding PE of 44/10/7 times the closing market value on February 21. In view of the company’s leadership in the field of genetically modified breeding Advantages: Once the genetically modified seed industry is commercialized, the company's seed industry business will grow rapidly.

Risk warning:

Epidemic risk; price fluctuation; policy change risk; market release not meeting expectations; GM business promotion not meeting expectations.