HS-全球-农业行业-全球农业行业手册：我们都需要吃饭-2020.4.22-31页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:HSBC Securities(USA)Inc View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO MAINLAND CHINA COVID-19 disruptions in agribusiness look largely manageable We highlight our preferred stocks in the space defensive and/or deeply undervalued names We like ASF-related stocks(Wens,Cranswick,Rumo)and oversold agchem names(NTR,UPL,OCI,Xinyangfeng)Agribusiness Playbook:Focus on bottom-up ideas COVID-19 has affected some parts of the agriculture value chain,but the essential nature of the business appears to have kept the disruption to manageable levels.As the situation is fluid,we shift the spotlight to a bottom-up approach to investments.Our preferred stocks in the space have one or more of these three factors we see as needed to deliver share price outperformance:defensive characteristics,solid structural trend and deeply undervalued multiples.African swine fever(ASF)remains a central theme;there is now strong evidence of hog herd recovery in mainland China,which should benefit Wens Foods,Cranswick and Rumo.Although their share prices have recovered in the past month,valuations for our seven preferred stocks remain at below their historical or recent averages(Page 2).Wens Foods,a leading meat producer in mainland China,is likely to see its market share in the hog industry grow exponentially through 2025e,based on our estimates.Cranswick,UKs leading food company,is benefitting from a period of high demand given higher consumption of meals at home and export demand from mainland China.Rumo,the largest rail transportation company in Brazil,is benefitting from favorable FX rates and strong soybean demand from mainland China due to significantly high crush margins and low soy inventory levels(lowest since November 2013).Nutrien,the worlds largest fertilizer company,is seeing strong demand for crop input products.Its staple-like retail operation could mitigate wholesale weakness to a large extent.UPL,the fifth largest agchem company globally,is a consistent industry outperformer whose valuation is compelling with strong cash generation even in our bear case.OCI NV,a leading nitrogen producer,has seen its share price corrected significantly,mainly due to debt concerns although we see a path to rapid deleveraging in the next few years.Xinyangfeng,mainland Chinas largest phosphate producer,is a classic case of a bottom-up idea as its product spreads are improving given its low-cost advantage even as the industry faces oversupply issues in the short run.22 April 2020 Alexandre Falcao Global Ag/EV Materials&LatAm Industrials Analyst HSBC Securities(USA)I+1 212 525 4449 Santhosh Seshadri*,CFA Analyst HSBC Securities and Capital Markets(India)Private Limited santhosh.seshadrihsbc.co.in+91 80 4555 2758 Nicholas Paton*,CFA Senior Analyst HSBC Bank Middle East Ltd +971 4 423 6923 Saurabh Jain*Analyst HSBC Securities and Capital Markets(India)Private Limited saurabh2jainhsbc.co.in+91 22 6164 0691 Eric Shen*(S1700519030001)Head of A-share Petrochem&New Materials Research HSBC Qianhai Securities Limited +86 10 5795 2343 Andy Li*(S1700519070001)Head of A-share Agriculture Research HSBC Qianhai Securities Limited +86 21 6081 3812 Doriana Russo*Analyst HSBC Bank plc +44 20 3359 5588 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Global Agribusiness Equities Agribusiness Global Sector Playbook:We all need to eat Equities Agribusiness 22 April 2020 2 Recent reports Climate change,coronavirus and soft commodities,4 February 2020 Global Agribusiness:US-China trade deal playbook,5 February 2020 Expert call takeaways:both long-term production and capacity recovery likely to be affected by NCP.17 February 2020 Sow inventory continues to recover;we remain bullish on industry leaders.18 March 2020 Global Agribusiness:COVID-19 and beyond:Better the bird in hand.2 April 2020 HSBC Global Agribusiness and Food analysts preferred stocks BBG Latest Target Implied Mkt Cap _ EV/EBITDA(x)_ PE(x)_ Company Code Category CCY Rating Price Price Upside(USDm)2020e 2021e 2020e 2021e African Swine Fever-related stocks Wens Foodstuff Group 300498 CH Food CNY Buy 30.76 45.00 46.3%23,102 4.8 5.3 5.9 7.2 Cranswick CWK LN Food GBP Buy 36.60 38.60 5.5%2,386 13.8 12.5 23.7 22.0 Rumo SA RAIL3 BZ Transportation BRL Buy 20.04 22.50 12.3%5,901 10.0 8.0 33.7 20.2 Agchem Nutrien NTR US Chemicals USD Buy 35.99 47.00 30.6%20,622 6.8 6.1 19.3 15.6 OCI NV OCI NA Chemicals EUR Buy 11.51 18.60 61.6%2,625 6.6 4.4 -19.6 Xinyangfeng 000902 CH Chemicals CNY Buy 8.16 12.60 54.4%1,538 6.3 4.7 10.9 8.3 UPL UPLL IN Chemicals INR Buy 354.75 450.00 26.8%3,540 6.9 5.9 10.8 8.5 Note:Latest prices as of 20 April 2020.Source:Refinitiv Eikon,HSBC estimates HSBC Global Agribusiness and Food valuation comparisons BBG Latest Target Mkt Cap _ EV/EBITDA(x)_ _ PE(x)_ Company Code Analyst CCY Rating Price Price USD m 2020e 2021e 2020e 2021e LatAm Agribusiness Adecoagro AGRO US Alexandre Falcao USD Buy 3.99 9.00 467 3.8 3.1 6.9 4.1 Sao Martinho SMTO3 BZ Alexandre Falcao BRL Buy 17.38 24.00 1,141 4.5 3.8 11.2 9.9 Cosan SA CSAN3 BZ Alexandre Falcao BRL Buy 56.49 68.00 4,170 5.1 4.5 12.2 11.0 Rumo SA RAIL3 BZ Alexandre Falcao BRL Buy 20.04 22.50 5,901 10.0 8.0 33.7 20.2 Median 4.8 4.1 11.7 10.5 Global Food Cranswick CWK LN Doriana Russo*GBP Buy 36.60 38.60 2,386 13.8 12.5 23.7 22.0 JBS JBSS3 BZ Alessia Maria Apostolatos BRL Buy 21.35 37.00 10,747 3.3 3.0 4.3 4.5 Marfrig MRFG3 BZ Alessia Maria Apostolatos BRL Buy 9.57 14.00 1,267 2.7 2.8 6.0 7.4 Haid group 002311 CH Andy Li*CNY Buy 41.25 42.00 9,218 16.7 14.0 24.4 21.0 Muyuan Foods 002714 CH Andy Li*CNY Hold 124.10 107.00 38,685 7.0 8.3 8.9 11.8 Wens Foodstuff Group 300498 CH Andy Li*CNY Buy 30.76 45.00 23,102 4.8 5.3 5.9 7.2 Median 5.9 6.8 7.5 9.6 Biotech Jinyu Bio-technology 600201 CH Andy Li*CNY Buy 24.10 25.20 3,838 20.9 14.6 59.6 42.8 Genus GNS LN Anand Date,CFA*GBP Buy 36.50 35.50 2,963 28.8 25.8 42.8 38.8 Median 24.8 20.2 51.2 40.8 Global Fertilizers CF Industries CF US Alexandre Falcao USD Buy 27.55 36.00 5,890 7.7 6.4 33.8 17.1 Mosaic MOS US Alexandre Falcao USD Buy 11.14 15.00 4,222 5.7 4.4 23.8 8.8 Nutrien NTR US Alexandre Falcao USD Buy 35.99 47.00 20,622 6.8 6.1 19.3 15.6 Saudi Arabian Fertilizer SAFCO AB Nicholas Paton,CFA*SAR Hold 64.40 77.60 7,150 12.8 10.6 18.1 14.7 OCI NV OCI NA Nicholas Paton,CFA*EUR Buy 11.51 18.60 2,625 6.6 4.4 -19.6 Median 6.8 6.1 19.3 15.6 Mainland China Fertilizers Zangge Holding 000408 CH Eric Shen*CNY Buy 5.78 9.93 1,629 3.8 2.3 7.1 5.8 Xinyangfeng 000902 CH Eric Shen*CNY Buy 8.16 12.60 1,538 6.3 4.7 10.9 8.3 Sinofert 297 HK Eric Shen*HKD Buy 0.69 1.30 625 4.7 3.7 7.8 5.3 China BlueChem 3983 HK Eric Shen*HKD Buy 1.17 2.54 267 -5.4 4.2 Salt Lake Industry 000792 CH Eric Shen*CNY Reduce 9.65 2.28 7,413 12.0 11.3 18.8 13.1 Kingenta 002470 CH Eric Shen*CNY Hold 2.79 2.78 1,296 3.9 2.7 12.7 9.1 Median 4.3 3.2 9.4 7.0 India Agri-inputs Bayer Crop Science BYRCS IN Saurabh Jain*INR Hold 3,964.45 3,650.00 2,327 41.4 34.7 47.6 39.7 Dhanuka Cropscience DAGRI IN Saurabh Jain*INR Buy 434.80 530.00 270 12.2 10.1 17.2 14.2 Kaveri Seed KSCL IN Saurabh Jain*INR Hold 374.90 480.00 295 6.3 5.1 11.7 10.3 Coromandel International CRIN IN Saurabh Jain*INR Hold 543.95 510.00 2,081 11.4 9.9 19.2 16.4 Rallis India RALI IN Saurabh Jain*INR Hold 208.35 187.00 529 13.8 11.5 21.0 17.8 UPL UPLL IN Saurabh Jain*INR Buy 354.75 450.00 3,540 6.9 5.9 10.8 8.5 Median 11.8 10.0 18.2 15.3 Note:Latest prices as of 20 April 2020.*Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations.Source:HSBC estimates,Refinitiv Eikon 3 Equities Agribusiness 22 April 2020 Share price performances(in%terms)Note:Priced as of 20 April 2020.Source:Bloomberg Changes in consensus EPS forecasts for CY2020e and CY2021e Source:Bloomberg 199-282918122812-22-24-34-43-56-70-60-50-40-30-20-10010203040CWKRumoWensXinyangNTRUPLOCI1M3MYTD1YRAgchemsASF related stocks-80-70-60-50-40-30-20-1001020CWKXinyangWensUPLNTRRumoOCI4Wk%Chg:2020C4Wk%Chg:2021C3Mo%Chg:2020C3Mo%Chg:2021C12m Fwd PER and EV/EBITDA multiples Wens Foods CWK RUMO NTR UPL OCI Xinyang EV/EBITDA 1yr fwd 1Q20 4.4 12.8 9.9 7.7 6.9 4.8 5.9 LTA 11.9 8.6 8.2 8.7 7.4 6.9 7.5 2YR AVG 11.6 11.7 9.7 8.5 8.7 6.2 6.4 LTA+1 STD 15.5 11.0 9.9 9.9 9.4 8.0 9.0 LTA-1 STD 8.3 6.2 6.5 7.6 5.4 5.9 6.0(Discount)/Premium vs LTA-63%48%21%-12%-7%-31%-21%2YR AVG-62%9%2%-10%-21%-24%-9%PER 1 yr fwd 1Q20 5 21 27 16 11 10 10 LTA 15 15 59 17 12 11 37 2YR AVG 15 20 34 17 14 11 12 LTA+1 STD 20 19 106 19 16 14 72 LTA-1 STD 9 11 13 15 9 9 1(Discount)/Premium vs LTA-63%46%-55%-8%-12%-14%-73%2YR AVG-64%6%-22%-6%-23%-13%-15%Note:Priced as of 20 April 2020.Source:Bloomberg Equities Agribusiness 22 April 2020 4 Wens Foodstuff Group (300498 CH)5 Cranswick(CWK)8 Rumo(RAIL3 BZ)11 Nutrien Ltd(NTR US)14 OCI NV(OCI NA)17 UPL Ltd.(UPLL IN)21 Xinyangfeng(000902 CH)24 Disclosure appendix 27 Disclaimer 30 Contents 5 Equities Agribusiness 22 April 2020 Accelerated market share gains should drive solid returns Overview:Wens Foodstuff Group(300498 CH,CMP:RMB30.76,Buy;TP:RMB45.00)Wens is now one of mainland Chinas leading producers of hogs and yellow-feather broilers,a popular breed of chicken.The company went public in 2015 by merging with Guangdong Dahuanong,an animal products business.In 2019,Wens reared c18.5m pigs and c925m yellow-feather broilers.Investment thesis According to Chinas Ministry of Agriculture,sow inventory started to increase in November 2019.The most significant improvements were recorded at the larger hog farms,which tend to have better bio-safety standards.This pointed out a longer term trend:acceleration in the pace of consolidation as millions of smaller operators are squeezed out of this highly fragmented industry.In our view,the winners of the consolidation will be the big-listed companies.We expect Wens market share to expand from c3%in 2019 to c10%in 2025e,corresponding to c50-70m head of hogs(vs.18.5m in 2019).As the companys cost control is better than the industry average,we estimate its average ROE will stay above 15%in the long term.Since pork is deemed a necessary good by Chinese consumers,we believe that COVID-19 will have little impact on pork consumption and that hog prices will remain high in 2020e and 2021e.Wens announced only a limited impact on hog production in 2020e.We expect its profit to improve in 2020e.Key catalysts The key catalysts we see for Wens share price to outperform are higher-than-expected hog production volume and substantial improvement in earnings.Valuation and risks We continue to use a P/B-ROE methodology to value the stock.As we expect hog prices to peak in 2020e,the companys ROE is likely to reach a high in 2020e but start to decline in 2021e.Therefore,we use a 2020-21e average ROE for our valuation(unchanged).Based on our assumption of shareholder equity of cRMB56.58bn for 2020e and our estimate of a 2020e-21e average ROE of 41.5%,we apply our target P/B multiple of 4.2x(unchanged)to our BVPS of RMB10.65(unchanged)to derive our target price of RMB45(unchanged).Our target price implies 46.3%upside.We maintain our Buy rating.Wens Foodstuff Group(300498 CH)Hog production and the market share set to rise over 2020e-25e Given our expectation of high hog prices in 2020e,profit should improve Retain Buy and target price of RMB45 Andy Li*(S1700519070001)Head of A-share Agriculture Research HSBC Qianhai Securities Limited +86 21 6081 3812 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Equities Agribusiness 22 April 2020 6 Key downside risks:African swine fever risks:Our production and cost estimates are based on the assumption that Wens can effectively control African swine fever.If its hog farms are infected,then production and costs would be impacted and earnings would decline.Lower-than-expected hog production:Our estimates are based on continued rapid production growth.Wens earnings would be affected if production misses expectations.Lower-than-expected hog prices:The net profit attributable to the parent is highly sensitive to hog prices.Earnings would be affected if hog prices miss expectations.7 Equities Agribusiness 22 April 2020 Financial statements Year to 12/2018a 12/2019e 12/2020e 12/2021e Profit&loss summary(CNYm)Revenue 57,244 69,430 93,202 105,508 EBITDA 7,444 16,436 31,683 27,034 Depreciation&amortisation-2,184-1,651-2,214-2,740 Operating profit/EBIT 7,277 16,805 31,489 26,316 Net interest-101-101-212-192 PBT 4,284 14,685 29,257 24,103 HSBC PBT 4,284 14,685 29,257 24,103 Taxation-28-95-189-155 Net profit 3,957 13,899 27,691 22,812 HSBC net profit 3,957 13,899 27,691 22,812 Cash flow summary(CNYm)Cash flow from operations 6,494 17,385 28,028 26,169 Capex-3,222-5,000-5,000-5,000 Cash flow from investment-4,768-5,000-5,000-5,000 Dividends-2,657-6,949-13,845 Change in net debt 517-6,554-8,973-9,575 FCF equity 3,273 12,385 23,028 21,169 Balance sheet summary(CNYm)Intangible fixed assets 1,356 1,255 1,155 1,054 Tangible fixed assets 18,250 21,700 24,587 26,948 Current assets 21,802 28,954 40,280 54,371 Cash&others 1,853 8,407 17,380 26,955 Total assets 53,950 64,327 78,315 94,542 Operating liabilities 2,679 9,087 9,157 9,183 Gross debt 2,415 2,415 2,415 2,415 Net debt 5,335-1,220-10,193-19,768 Shareholders funds 34,568 42,737 56,583 67,991 Invested capital 36,876 34,415 39,484 46,234 Ratio,growth and per share analysis Year to 12/2018a 12/2019e 12/2020e 12/2021e Y-o-y%change Revenue 2.9 21.3 34.2 13.2 EBITDA-20.0 120.8 92.8-14.7 Operating profit-22.5 130.9 87.4-16.4 PBT-39.6 242.8 99.2-17.6 HSBC EPS-41.4 251.2 99.2 Ratios(%)Revenue/IC(x)1.7 1.9 2.5 2.5 ROIC 15.3 41.2 79.2 56.3 ROE 11.4 32.5 48.9 33.6 ROA 8.5 24.8 41.1 27.9 EBITDA margin 13.0 23.7 34.0 Operating profit margin 12.7 24.2 33.8 24.9 EBITDA/net interest(x)73.9 163.1 149.4 Net debt/equity 15.0-2.7-17.1-27.4 Net debt/EBITDA(x)0.7-0.1-0.3 CF from operations/net debt 121.7 Per share data(CNY)EPS Rep(diluted)0.75 2.62 5.21 4.29 HSBC EPS(diluted)0.75 2.62 5.21 DPS 0.50 1.31 2.61 2.15 Book value 6.51 8.05 10.65 12.80 Valuation data Year to 12/2018a 12/2019e 12/2020e 12/2021e EV/sales 2.9 2.3 1.6 1.4 EV/EBITDA 22.7 9.9 4.8 5.3 EV/IC 4.6 4.7 3.9 3.1 PE*41.3 11.8 5.9 7.2 PB 4.7 3.8 2.9 2.4 FCF yield(%)2.0 7.6 14.1 13.0 Dividend yield(%)1.6 4.3 8.5 7.0*Based on HSBC EPS(diluted)ESG metrics Environmental Indicators 12/2018a Governance Indicators 12/2019a GHG emission intensity*n/a No.of board members 12 Energy intensity*n/a Average board tenure(years)5.1 CO2 reduction policy Yes Female board members(%)16.7 Social Indicators 12/2018a Board members independence(%)33.3 Employee costs as%of revenues 10.1 Employee turnover(%)n/a Diversity policy n/a S