EquityResearch21June2019FOCUSBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ThisresearchreporthasbeenpreparedinwholeorinpartbyequityresearchanalystsbasedoutsidetheUSwhoarenotregistered/qualifiedasresearchanalystswithFINRA.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE18.Restricted-InternalAmericasAgribusinessTSN&JBS:WelcomeToANewEraWeincreaseourTSNpricetargetto$100,andupgradeJBStoOWwithahigherpricetargetofR$26:DiversifiedanimalbasedproteincompaniesseemsettobenefitmostfromtheworseningAfricanSwineFever(ASF)situationinChinaandothercountriesinSoutheastAsia.Whilewebelievetheimpactin2019andearly2020islikelytobelimited,weseeincrementallymorebenefitsinthemediumtolongertermfordiversifiedproteincompanieslikeTSNandJBS.TakingasecondlookatASF–itseemsoutofcontrol:AnalyzingthemostrecentASFoutbreaksinChinaandparticularlyinVietnam,webelievethatthevirushasgonewelloutofcontroloflocalauthoritiesand,ashistoryshows,eradicatingthevirusislikelygoingtotakeyears,ifnotdecades.Weestimatethatthecurrentimpactonglobalanimal-basedproteinsupplyshouldbecloseto6%,alevelnotveryeasytoreplace.This“supplyshock”willlikelyhitintheback-halfof2020andhavesignificantimpactonproductpricinginthecomingyears–TSNandJBSwithamajorfootprintintheAmericasseemsettobenefitmost.Don’tunderestimatetheupsidepotentialfromalternativemeat:Whilestillanunderdevelopedcategory,thealternativemeatspaceinourviewpresentsplentyofopportunities;newandincumbentplayerscouldgrab~10%ofthe$1.4tnmeatmarketin10years.WithTSNjustannouncingafullyplantbasedanda“hybrid”offering,webelievethecompanyislikelytograbasignificantportionofthismarketpotential.JBS,meanwhile,hasannouncedanalternativemeatproductlaunchinBrazilandissettolaunchaproductintheU.S.laterthissummer.Upbea...
