Apr. 25, 2022
On April 20, China's A-share agricultural sector soared. Soybean, planting, rural revitalization and other concept stocks rose, and Hefei Fengle Seed Co., Ltd., Zhongnongfa Seed Industry and other concept stocks hit the daily limit. Recently, judging from the 2021 financial reports released by listed companies in the Chinese seed industry, the sales and profits of some companies have increased significantly.
Hefei Fengle Seed's operating income in 2021 is 2.617 billion yuan, a year-on-year increase of 6.54%. The net profit attributable to shareholders of listed companies was 183 million yuan, a year-on-year increase of 263.05%. The company's seed industry reported operating revenues of 445 million yuan, an increase of 15.95% compared with the same period last year, due to the national integration of the corn industry and the continuous improvement of the company's internal scientific research, sales and service system covering the entire ecological area.
The annual report of Zhongnongfa Seed Industry shows that last year's revenues were 3.764 billion yuan, and the net profit was 36.31 million yuan. Among them, the seed business reported operating income of 878 million yuan, a year-on-year increase of 42%; gross profit was 180 million yuan, a year-on-year increase of 39%. The company pointed out that as the access threshold for corn seed production increases, corn seed companies may usher in an industry reshuffle, while small and medium-sized enterprises with weak varieties will be eliminated from the market.
According to the annual report of Shandong Denghai Seeds Co., Ltd, the company recorded revenues of some 1.101 billion yuan in 2021, an increase of 22%. Net profits were some 233 million yuan, up 128% year on year. Due to rising commodity grain prices, farmers' enthusiasm for growing grain has further improved, and the company's seed business has grown, according to the company. The sales of corn, wheat and rice seeds have increased, compared with the same period in the previous year. Among them, the profitability of subsidiaries has increased significantly. The company also pointed out that the oversupply situation in the corn seed market improved last year. However, market competition is still fierce, as the number of approved varieties is large, which leads to a high degree of homogeneity.
In 2021, the operating revenues of Winall Hi-tech Seed Co., Ltd. reached 2.521 billion yuan, up 57.38% compared with the same period last year. Net profits attributable to shareholders of listed companies was 169 million yuan, up 26.68% year on year. The increase in sales was mainly due to the continuous growth of the company's seed business, the good performance of the hybrid rice, hybrid corn and other varieties promoted by the company, as well as the increase in the scale of its contract farming business.
The improved grain market condition, and the increase in sales and prices of major agricultural products, helped Jiangsu Provincial Agricultural Reclamation And Development Co., Ltd. achieve a consolidated total operating income of 10.64 billion yuan in 2021, an increase of 23.43% over the previous year; while the total consolidated profit is 839 million yuan, up 9.59% from the previous year. The net profit attributable to shareholders of listed companies was 737 million yuan, an increase of 10.06% over the previous year.
Ready to take off
The fluctuation of global food supplies and the possible food security crisis caused by the Russian-Ukrainian conflict will push China, which has raised the issue of food security to a national strategic level, to strengthen its belief in revitalizing the seed industry.
Chinese President Xi Jinping re-emphasized that seeds are the key to China's food security, during a visit to the national seed breeding base in Hainan in early April. He reiterated that China's grain security should be ensured with Chinese seeds.
The “Action Plan for Revitalizing the Seed Industry” was reviewed and approved at the 20th meeting of the Commission for Deepening Overall Reform of the China Central Committee, held on July 9, 2021. The “Action Plan” came into effect on March 1 this year.
In February, 2022 China released the No.1 Central Document, which set technological breakthroughs in seeds as a priority. This is the second consecutive year that the central government has put such high an emphasis on supporting seed development, including biotech seeds.
A series of policies favorable to seed innovation are expected to be implemented as a result of the country's focus on food security. Industry insiders generally believe that 2022 will be the year for China's seed industry to take off.
According to the analysis of Guosen Securities, a Chinese state-owned financial services company, the price of corn, wheat and other grains are expected to continue to remain high in 2022. The seed industry will experience a positive market situation in the next 2-3 years, and under the stimulation of high grain prices, farmers' demand for brand seeds is expected to increase. The agency also believes that the entry threshold of the industry will be further improved when the planting of GM crops is finally approved in China. The market share of leading companies will usher in a golden period of about 3 years, with more prominent growth attributes.
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