Behind Shengnong Seed's Significant Loss Reversal: Non-recurring Gains Embellish Results, Traditional Main Business Shrinks, New Businesses Await Growth

Securities Star Liu Haohao

Recently, Shennong Seed Industry (300189) released a performance forecast, expecting to achieve a net profit attributable to shareholders of over 90 million yuan in 2025. Not only has the company successfully turned losses into profits, but it also may set a new high since its listing during the same period. However, its net profit after deducting non-recurring gains and losses remains marginal or near breakeven. This indicates that the company’s main business profitability remains relatively weak.

Securities Star notes that in recent years, Shennong Seed Industry has faced significant pressure on its performance. From 2014 to 2024, the company’s net profit after deducting non-recurring gains and losses has been in loss for 11 consecutive years. Behind this, intensified homogenized competition has led to a sharp decline in its traditional hybrid rice seed business, which was a major source of revenue, dropping from 349 million yuan in 2013 to just 44 million yuan in 2024. In recent years, the company has adopted a dual-driven development strategy of “crop seed industry + aquaculture seed industry,” attempting to reverse the downturn by vigorously developing rapeseed and aquaculture seed businesses. However, as of the first half of last year, revenue from aquaculture seeds accounted for only 3.34%. The scale of the company’s rapeseed seed business also needs to be expanded. In June last year, Shennong Seed Industry launched a private placement plan aimed at expanding the scale of its rapeseed seed business. However, after the announcement, there has been little substantive progress, raising market concerns about the company’s transformation prospects.

Marginal Profitability After Deducting Non-Recurring Items

Shennong Seed Industry was listed in 2011 and mainly engaged in the breeding, propagation, seed production, sales, and technical services of major crops such as high-quality rapeseed, rice, and maize, as well as grain, oil, and agricultural by-products processing driven by core seed varieties.

The performance forecast shows that Shennong Seed Industry expects a net profit attributable to shareholders of 90 million to 120 million yuan in 2025, compared to a loss of 49.87 million yuan in the same period last year; and a net profit after deducting non-recurring gains and losses of 0 to 5 million yuan, compared to a loss of 45.62 million yuan last year.

Regarding the performance change in 2025, Shennong Seed Industry stated that during the reporting period, the company’s operating income increased significantly compared to the previous period, and cost and expense control measures achieved certain results, enabling the company to turn losses into profits.

It is noteworthy that although the company’s net profit attributable to shareholders in 2025 is expected to grow significantly year-on-year, its net profit after deducting non-recurring gains and losses remains marginal or near breakeven. This situation is mainly influenced by non-recurring gains and losses.

According to disclosures, in 2025, the company transferred part of its equity in Hainan Polian Biotechnology Co., Ltd. As per accounting standards, the company’s accounting treatment of its remaining equity shifted from the equity method to other equity instrument investments. The disposal of equity and the change in accounting method for remaining equity generated investment income, increasing the company’s profit.

This also means that although Shennong Seed Industry is expected to turn losses into profits in 2025, the improvement in its core business profitability remains limited, and its profit foundation is not very solid.

Securities Star observes that Shennong Seed Industry reached a performance peak in 2013, with revenue and net profit after deducting non-recurring items of 454.4 million yuan and 34.68 million yuan, respectively. Since then, due to intensified homogenized competition and product structure optimization, its revenue has declined sharply. In 2024, revenue was only 156.5 million yuan, a 66% decrease from 2013. Despite the significant revenue decline, limited cost reductions kept performance under pressure. From 2014 to 2024, the company’s net profit after deducting non-recurring gains and losses has been in loss for 11 consecutive years, totaling over 700 million yuan in accumulated losses.

In the first three quarters of last year, the company’s performance showed signs of improvement. During this period, revenue reached 158.7 million yuan, up 29.36% year-on-year; net profit after deducting non-recurring items was 8.023 million yuan, up 158.97%. This was the first positive net profit after deducting non-recurring items in the same period in the past five years.

Securities Star notes that in the first three quarters of last year, the company’s operating costs increased by 36.4% year-on-year, significantly higher than revenue growth, but gross profit still increased modestly. Additionally, benefiting from declines in sales and management expenses, the company’s period expenses decreased by 25% year-on-year, leading to a substantial increase in profitability.

Quarterly, in 2025 Q1-Q3, Shennong Seed Industry recorded net profits after deducting non-recurring items of -1.431 million yuan, -4.946 million yuan, and 14.4 million yuan, respectively. Based on this, Q4’s net profit after deducting non-recurring items is estimated to be between -8.023 million yuan and -3.033 million yuan.

Due to seasonality in the seed industry, Q3 and Q4 are traditionally peak seasons. Although last year’s Q3 net profit after deducting non-recurring items increased by 657.8% year-on-year, Q4 still experienced losses, which weighed on the full-year performance.

“New Growth Pole” Still on the Road

From the perspective of main business, Shennong Seed Industry currently faces severe structural challenges. On one hand, its traditional core hybrid rice seed business has shrunk significantly; on the other hand, the new business revenue scale it hopes for still needs to be expanded.

As the “foundation” of Shennong Seed Industry, the hybrid rice seed business accounted for nearly 80% of revenue in 2013. However, in recent years, with increasing homogenized competition and product structure optimization, the business has shrunk sharply, with revenue dropping from 349 million yuan in 2013 to just 44 million yuan in 2024 (28.24% of total revenue).

In response to market changes, the company has shifted its strategy in recent years, vigorously implementing a “crop seed industry + aquaculture seed industry” dual-driven development plan. On one side, it actively develops aquaculture seeds, building a full industry chain ecosystem for land and sea aquaculture. On the other side, it focuses on expanding the rapeseed seed business and increasing the commercialization of its core scientific varieties, such as the “Qingyou” series.

According to last year’s disclosures, the first phase of the Shennong Aquaculture Seed Source Technology Industrial Park has begun production in 2025, and a deep-sea net cage aquaculture base was also launched last April. However, as of the first half of last year, revenue from aquaculture products remained small, accounting for only 3.34%, far from achieving scale.

Regarding rapeseed seeds, after years of scientific research, Shennong Seed Industry has established a leading position in the industry. The company disclosed that its “Qingyou” series has achieved breakthroughs in high-yield, high-quality oil content breeding, reaching an internationally advanced level in high-oil-content rapeseed varieties. In 2024, revenue from rapeseed seeds was 44 million yuan (28.36% of total revenue), surpassing hybrid rice seed revenue. The gross profit margin of this business is as high as 62.78%, far exceeding the company’s overall gross margin of 37.51% in 2024.

Against this backdrop, accelerating the expansion of the rapeseed seed business is expected to be a key lever for Shennong Seed Industry to reverse its performance decline.

Last June, the company announced a private placement plan raising no more than 144 million yuan. According to the plan, 104 million yuan of the raised funds will be invested in the “Rapeseed ‘Good Variety + Good Method’ Demonstration and Promotion Project” (hereinafter referred to as the “Rapeseed Demonstration Project”). The total investment in this project is 148 million yuan, with an expected construction period of 24 months.

The project aims to establish demonstration, seed sales, and agricultural machinery service centers in six major rapeseed planting areas in Hunan, including Changsha, and set up 28 outlets in subordinate counties to promote rapeseed planting demonstrations. These six areas accounted for 61.51% of Hunan’s rapeseed planting area in 2023. Shennong Seed Industry stated that promoting its rapeseed varieties locally could effectively increase planting coverage in Hunan, boosting the company’s core seed business revenue. In the long term, this project will help consolidate the company’s industry position and enhance its core competitiveness and long-term profitability.

However, after the announcement, the private placement plan entered a prolonged “stalled” phase. In September last year, an investor asked on an interactive platform why the plan had not been submitted for review to the Shenzhen Stock Exchange three months after its announcement. The company replied that it was organizing the follow-up work and would fulfill its information disclosure obligations in accordance with laws and regulations in a timely manner.

Since then, Shennong Seed Industry has not disclosed any updates on this matter. This has raised concerns among some investors about whether there are difficulties in finding subscription targets for the private placement.