On December 6, Lude Environment (688156) announced that in order to support the development of the company's distiller's grains biological fermented feed business, and at the same time meet the needs of its own business development such as product development, production and sales of subsidiaries, Zunyi Lude plans to introduce shareholders of agricultural feed through capital increase and share expansion, and increase the registered capital from 60 million yuan to 80 million yuan. Lude Environment waived the right of first refusal for this capital increase, and the new subscription capital contribution of 20 million yuan was made by Nongfa Feed, and the capital increase price was 1 yuan for every 1 yuan of registered capital. After the capital increase, Nongfa Feed will hold 25% of the equity of Zunyi Lude, and Lude Environment will hold 75% of the equity of Zunyi Lude.

Nongfa Feed is a wholly-owned grandson company of Hubei Agricultural Development Group Co., Ltd., and the actual controller is Hubei State-owned Assets Supervision and Administration Commission. Hubei Agricultural Development Group Co., Ltd. is the only provincial state-owned enterprise in Hubei Province with modern agriculture as its main business, and is a modern agricultural industry chain production and service provider integrating modern seed industry, characteristic planting and breeding, agricultural and sideline product processing and domestic and foreign trade, with high visibility and brand influence.

According to the agreement, Nongfa Feed and its affiliates will purchase Zunyi Lude's bio-fermented feed products.

The introduction of Zunyi Lude Feed as a new shareholder is conducive to its reserve of working capital, strengthening the synergy of the industrial chain, and relying on its group brand advantages, it will rapidly expand its market share and accelerate the pace of capacity construction and market development.

The inorganic solid waste treatment business has always accounted for the revenue of Lude Environment, but with the expansion of the business, the traditional environmental protection solid waste business has dragged down the revenue. From January to September 2024, the company's inorganic solid waste treatment service business segment achieved an operating income of 35.413 million yuan, a decrease of 57.94% from the same period of the previous year. The main reason is that the river and lake sludge treatment service business is continuously affected by the macro environment changes in the environmental protection industry, and the operating rate of old projects is insufficient; The company's engineering mud treatment service business was affected by the downturn in the real estate construction industry, and the start of housing construction, infrastructure construction and other engineering projects decreased, and the amount of mud collected and disposed of decreased significantly, resulting in a decline in the operating income of the business.

The company's gross profit margin was also affected by the solid waste business. The gross profit margin of Lude Environment in the third quarter was 23.7%, a year-on-year decrease of 10.6 pct, mainly due to the decline in the revenue of the traditional solid waste business and the large amortization of project fixed costs.

At the same time, the company's distiller's grains resource utilization has expanded rapidly, and the proportion of revenue has continued to increase. From 2020 to 2022, the compound growth rate of the company's distiller's grains bio-fermented feed business revenue reached 72.89%, and in the first half of 2023, the proportion of this business revenue in the company's operating income was 59.45%, surpassing the inorganic solid waste treatment business for the first time.

From January to September 2024, the company's distiller's grains bio-fermented feed business achieved product sales of 81,100 tons, an increase of 22.98% over the same period of the previous year; The sales revenue was 169 million yuan, an increase of 20.92% over the same period of last year.

Previously, Lude Environment introduced in an interview that in recent years, the company's distiller's grains biological fermentation feed business has developed rapidly, and the proportion of revenue and gross profit has increased significantly, while the proportion of revenue from inorganic solid waste treatment services has been decreasing. From January to September 2024, the bio-fermented feed business accounted for 82.64% of the main business revenue.

As an environmental protection service provider for liquor enterprises, Lude Environment has signed long-term agreements with large liquor companies in the main producing areas of soy sauce liquor, such as Langjiu, Zhenjiu Liquor and Jinshajiao Liquor, to lock in the distiller's grains resources; At the same time, the company has expanded in the field of strong flavor and other aromatic liquor grains, and has reached long-term cooperation with Anhui Gujing Gongjiu, Jiangsu Yanghe Co., Ltd. and Hunan Jiugui Liquor.

At the same time, superstar agriculture and animal husbandry, Haid Group and other long-term cooperation of old customers are continuing to use Lude Environment's distiller's grains biological fermentation feed products, this year has opened up the new hope pig industry line, elephant agriculture and animal husbandry and other head customers, a number of head pig enterprises have completed the test, evaluation, and some have entered the bargaining stage.

Lude Environment has successively built and put into operation 4 bio-fermented feed factories for distiller's grains, including Gulin Lude, Jinsha Lude, Bozhou Lude and Zunyi Lude. Zunyi Lude was established in April 2022, and after 2 years of preparation, it has reached the state of completion and production.

It is worth noting that from January to September 2024, the gross profit margin of the bio-fermented feed business of distiller's grains was 25%, a decrease of 5.5% from the same period last year, mainly due to the fact that, on the one hand, the price of distiller's grains centrally collected and stored in the second half of 2023 was higher, and the cost of raw materials used in production this year was higher; On the other hand, in 2024, the volume and price of feed breeding will fall, which will have a certain impact on the company's product sales. At present, the high-priced distiller's grains collected and stored in 2023 have been gradually produced and consumed, and the prices of distiller's grains collected and stored this year are relatively low, and it is expected that the gross profit margin of the bio-fermented feed business products of distiller's grains will recover in the future.

Recently, the open source securities research report believes that the company's traditional environmental protection business is under pressure, the distiller's grains biological fermentation feed business continues to develop, and the company actively takes measures to clear historical arrears, accounts receivable is expected to be benign and stable recovery, and the short-term company's performance is under pressure, downgraded to "overweight" rating.