Summary of Dabeinong (002385.SZ) Earnings Review Company Overview - **Company**: Dabeinong (002385.SZ) - **Industry**: Agriculture in China - **Market Cap**: Rmb17.5 billion / $2.5 billion - **Enterprise Value**: Rmb25.8 billion / $3.6 billion - **Current Price**: Rmb4.23 - **12-Month Price Target**: Rmb8.00 - **Upside Potential**: 89.1% [1][2][6] Key Financial Highlights - **1H25A Net Profit**: Rmb235 million, EPS of Rmb0.055/share, compared to a loss of Rmb0.036/share in 1H24A [1] - **Recurring Net Profit**: Rmb196 million, versus a loss of Rmb244 million in 1H24A [1] - **Revenue Growth**: 4% YoY to Rmb13,559 million in 1H25A [40] - **Gross Profit**: Increased by 12% YoY to Rmb1,915 million [40] - **No Final Dividend Declared**: Consistent with the previous year [1] Earnings Estimates Revisions - **2025E Recurring Earnings**: Revised down by 25% due to lower hog pricing assumptions [2] - **2026E Recurring Earnings**: Revised down by 4% [2] - **2027E Recurring Earnings**: Revised down by 9% [2] Segment Performance - **Feed Operations**: Contributed 56% of total gross profit; gross profit per ton was Rmb417, down 10% YoY [23] - **Hog Farming**: Contributed 29% of total gross profit; total unit cost of market hog decreased by 16% YoY [26] - **Traditional Seeds**: Contributed 9% of total gross profit; driven by higher sales volume and unit gross profit [27] - **Biotech Seeds**: Expected to generate Rmb116 million in revenue in 2025E, with a potential increase to Rmb532 million in 2026E [21] Market Dynamics - **Hog Pricing Outlook**: Expected to improve to Rmb16.5/kg in 2026E, up from Rmb14.8/kg in 1H25A [20] - **Biotech Seed Penetration**: Anticipated to reach 7% in the 2024/25 planting season, lower than previous estimates [21] - **Traditional Seed Market**: Potential market gains in Southwestern regions due to product promotion [22] Cash Flow and Balance Sheet - **Operating Cash Flow**: Turned positive in 1H25A, compared to negative Rmb190 million a year ago [34] - **Free Cash Flow**: Negative Rmb363 million in 1H25A, an improvement from negative Rmb593 million in 1H24A [34] - **Net Debt**: Rmb8.14 billion as of end of 1H25A, with net gearing at 93% [35][36] Valuation and Risks - **Valuation Methodology**: Based on average near-term and long-term valuations, with a target price implying a P/E of 34x for 2025E [37] - **Key Risks**: Include uncertainty in hog prices, lower-than-expected feed consumption demand, and slower government plans for GM seed commercialization [38] Conclusion - **Investment Recommendation**: Maintain Buy rating on Dabeinong with a target price of Rmb8.00, reflecting strong potential upside based on market positioning and growth in biotech seeds [2][37]