汇丰银行-全球-农业行业-全球肥料产业：寻找亮点-2019.10.21-30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 Urea stands out as the most defensive segment amid weakening fertilizer prices We turn cautious on short-term urea price but spread at multiyear high benefits earnings We prefer Buy-rated OCI(TP EUR26.60),CF(TP to USD55 from USD52),China Blue(TP HKD2.54)in the space We leverage our research presence in China,Middle East,US and India to develop a global view on urea supply and demand dynamics Although weak demand in 2019 has seen NPK prices nosediving,urea has remained largely stable due to tightening supply despite falling energy costs.In our view,urea balance could tighten further in 2020 with net capacity additions expected to be the lowest in this decade and as demand rebounds on agronomic needs.We take a cautious view on short-term urea prices,however,as macro headwinds like lower energy prices and FX have trimmed the cost curve by USD15-20/t;we cut our price forecasts by 5-7%(pg 3).Nevertheless urea spread is close to a 5yr high(pg 2)and any further decline in energy costs should support profitability in our view.Growing production in China(pg 10)presents a short-term risk but not enough to derail broader recovery in our view(see Sowing the Seeds of Growth 27 Jan 2019).Supply constraint could sustain urea recovery:Although global utilization is at c77%,many low-cost,export-oriented destinations are operating at close to full utilization(pg 2),hence a major part of supply has to come from high-cost regions that hold the current price floor.In 2020,seasonal and trade constraints should warrant a sharp rise in utilization rates(+3-6%)in regions closer to end markets and North American producers will likely have to switch away from other nitrogen products,thereby eventually improving spreads for the nitrogen chain.Our preferred picks,all rated Buy:We like OCI(TP EUR26.60)due to its deleveraging story and potential to crystallize value from accretive investments;CF Industries (TP to USD55 from USD52)given its scale,cost advantage and strong cash generation;China Blue(TP HKD2.54)due to improving product spread that should lead to margin expansion and its preferential access to natural gas that should lead to a spread premium vs China industry average.Key stock summary Current _ TP _ _ Rating _ Upside/Market cap PE EV/EBITDA Company Ticker Currency price Old New Old New downside (USDm)2019e 2019e CF Industry CF.N USD 48.94 52.00 55.00 Buy Buy 26.7%28,035 18.0 x 7.8x Nutrien NTR.TO USD 47.77 65.00 62.00 Buy Buy 15.1%10,429 21.7x 9.1x OCI NV OCI.AS EUR 21.21 26.60 26.60 Buy Buy 25.4%4,978 NA 10.3x SAFCO 2020.SE SAR 80.60 78.00 77.60 Hold Hold-3.7%8,954 24.5x 18.1x China BlueChemical 3983.HK HKD 1.99 2.54 2.54 Buy Buy 28.9%1,188 12.3x 7.0 x Source:HSBCe,Refinitiv Eikon.Priced as of close at 18 Oct 2019 21 October 2019 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 Eric Shen*(S1700519030001)Head of A-share Petrochem&New Materials Research HSBC Qianhai Securities Limited +86 10 5795 2343 Nicholas Paton*,CFA Senior Analyst HSBC Bank Middle East Ltd +971 4 423 6923 Sriharsha Pappu*Global Head of Chemicals Research HSBC Bank plc +44 20 7991 9243 Prateek Bhatnagar*,CFA Analyst HSBC Securities and Capital Markets(India)Private Limited prateekbhatnagarhsbc.co.in+91 80 4555 2757 Augusto Ensiki LatAm Industrials,Agri,Healthcare and Education HSBC Securities(USA)I+1 212 525 4915 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Global Agribusiness Equities Chemicals Global Fertilizers:Finding the bright spot Equities Chemicals 21 October 2019 2 Executive Summary Fertilizer prices have been recovering since 2016,however 2019 proved to be a gloomy year as demand destruction due to bad weather sent NPK prices nosediving,leading to production cuts to sustain prices.Urea seems to be quite resilient,however,as supply dynamics have been relatively good.We have written in previous notes about tightening supply due to fewer capacity additions as well as supply rationalization in China paving the way for sustained recovery.As we enter 2020,supply dynamics look set to improve further as net capacity additions should be the lowest in this decade.And there seems to be no constraint on demand recovery in 2020 assuming normal weather.That is,underlying demand drivers viz.acreage expansion,agronomic needs,increased affordability,trade resolution,etc.,are all highly supportive.We think Chinese exports will grow marginally on increased cost competitiveness,but medium term,increased supply from China and other high-cost destinations are needed to meet increasing demand given capacity constraints in major producing regions and fewer new plants coming online.Favorable supply/demand dynamics should continue to propel the medium-term recovery,in our view.However,urea has to sail against macro headwinds like lower energy prices and RMB depreciation that helps the cost curve and prices.Hence we take a cautious stance on short-term prices but the product spread is at a 5-year high,which should drive strong earnings growth and shareholder returns.We have already seen major companies announcing significant buybacks since 2018.Our company theses are idiosyncratic but in general we favor efficient companies with low costs and other structural advantages like scale and product optionality.Urea prices remained stable on favorable supply despite convergence in gas costs that helps the cost curve(USD/mmbtu)Source:CRU,HSBC Source:Refinitiv Eikon 2731992202512461501752002252502753001Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19Urea price-FOB Blacksea(USD/t)-QtrAnnual price0246810122010 2011 2012 2013 2014 2015 2016 2017 2018 2019Henry HubZeebrugge 3 Equities Chemicals 21 October 2019 leading to improving spreads across regions(Urea spread based on Zeebrugge gas)Source:HSBC,CRU,Company reports Fewer net capacity additions of urea(mt)Source:CRU,Company reports and capacity constraints to sustain price growth(utilization rate and indicative cost of delivery,in USD/t)Source:HSBC,CRU,IHS,Company reports North America Utilization ex flexible production We acknowledge the contribution of Dhawal Khut.Mr.Khut is employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations 0100200300400500600700Jan-10Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17Jan-18Jan-19Ammonia cost(Integrated Zeebrugge)-USD/tOther gas costs(USD/t)Other costs(USD/t)Urea spread(NW Europe)USD190/tUSD196/t-20246810122010201120122013201420152016201720182019e2020f05010015020025030050%60%70%80%90%100%MiddleEastRussiaNorthAmericaNorthAfricaIndia(aftersubsidy)CIS exclrussiaW.Europe E.Europeex UkraineROWChinaUtilisation rate(%)Urea cost,FOB-USD/t(RHS)Equities Chemicals 21 October 2019 4 We reduce our 2019e and 2020e urea price forecasts by 5-7%given low energy prices and stronger USD vs key exporting regions like China.A strong rebound in North American demand will likely result in higher US premiums in 2020 than in 2019.We think ammonia will continue to underperform other nitrogen products as it has in 2019;we reduce 2019e and 2020e forecasts by 8-17%given high inventories and potentially weak industrial demand for ammonia.Our changes to nitrate forecasts reflect changes to ammonia/urea prices.For Phosphates&Potash,incremental demand is positive but ample inventory levels could delay price gains.We also reduce our potash price forecast as Chinas high inventory levels could further delay settlement of annual China contracts that could pressure suppliers to accept for lower contract prices.Downside risks:i)demand disruption due to bad weather and/or a slowdown in industrial demand;ii)higher Chinese exports on increasing cost competitiveness and fewer environmental controls.Upside risks:i)higher energy costs and a stronger RMB that lifts costs for marginal producers;ii)higher demand in North America due to resolution of trade tensions.Urea marginal cost sensitivity to coal prices and RMB _ Anthracite coal prices(RMB/t)_ 900 1000 1100 1200 1300 6.50 260 274 288 302 316 6.75 252 265 279 292 305 RMB vs USD 7.00 244 257 270 283 296 7.25 237 249 262 274 287 7.50 230 242 254 266 278 Source:HSBCe.Bloomberg NPK price forecast changes New forecasts 3Q 2019a 4Q 2019f 2019f 1Q 2020f 2Q 2020f 3Q 2020f 4Q 2020f 2020f 2021f Long term Ammonia Ammonia-(FOB Black Sea)USD/t 216 240 238 273 265 250 269 264 300 340 Ammonia-(FOB US NOLA)USD/st 231 263 271 306 295 281 298 295 336 363 Urea Urea(FOB Black Sea)USD/t 248 245 246 255 270 255 260 260 285 300 Urea(FOB US NOLA)USD/st 252 249 250 272 286 268 272 274 290 308 Urea(EXW China North)-RMB/t RMB/t 1900 2000 2050 Nitrate AN(France Spot)EUR/t 268 263 266 278 283 272 277 278 290 310 CAN(Germany Spot)EUR/t 194 185 196 213 216 208 212 212 225 240 UAN(France Spot)EUR/t 175 175 185 187 188 181 190 187 200 222 Phosphates DAP(CFR Bulk India spot)USD/t 342 330 367 360 385 395 385 381 400 420 DAP(FOB,US Tampa)USD/t 327 320 353 350 375 390 380 374 400 420 Potash MOP(CFR China contract)USD/t 275 300 310 330 Delta from previous forecast Ammonia-(FOB Black Sea)-4%-8%-8%-12%0%Ammonia-(FOB US NOLA)-14%-12%-6%-7%0%Urea(FOB Black Sea)1%-8%-7%-7%0%Urea(FOB US NOLA)-1%-8%-3%-5%0%Urea(EXW China North)-RMB/t -5%0%AN(France Spot)-EUR/t -1%-9%-3%-6%0%CAN(Germany Spot)-EUR/t 9%-13%-4%-9%0%UAN(France Spot)-EUR/t 3%-9%-2%-12%0%DAP(CFR Bulk India spot)1%-4%0%-1%0%DAP(FOB,US Tampa)0%-4%-1%0%0%MOP(CFR China contract)-1%-5%-3%0%Source:HSBCe,CRU 5 Equities Chemicals 21 October 2019 HSBC Global Fertilizers Coverage Company Name Rating RIC LCL CUR Target Price Share Price Market Cap(USD m)_P/E_ _EV/EBITDA_ _ EBITDA growth Dividend yield 2019e 2020e 2019e 2020e 2019e 2020e 2019e 2020e World ex-China Nutrien Ltd Buy NTR.TO USD 65.00 48.94 28,035 18.0 x 15.8x 7.8x 7.1x 14%6%3.6%3.7%CF Industries Holdings Buy CF.N USD 52.00 47.77 10,429 21.7x 19.2x 9.1x 8.4x 28%5%2.5%2.5%OCI NV Buy OCI.AS EUR 26.60 21.21 4,978 N/A 9.1x 10.3.x 5.0 x-14%82%0.0%0.0%Industries Qatar QSC Reduce IQCD.QA QAR 8.50 10.98 18,245 22.7x 17.4x 148.5x 78.1x-61%86%4.6%4.6%The Mosaic Company Buy MOS.N USD 28.00 19.55 7,544 15.8x 10.4x 5.9x 4.7x-4%20%1.0%1.5%UPL Buy UPLL.BO INR 720.00 599.00 6,439 16.5x 15.4x 17.1x 9.2x 17%80%1.3%1.2%Coromandel International Hold CORF.BO INR 440.00 418.35 1,722 17.0 x 15.5x 10.3x 9.3x 18%5%1.6%1.9%SQM Hold SQM.N USD 26.50 28.37 7,451 24.5x 18.2x 11.1x 9.3x-20%22%1.6%3.1%Saudi Arabian Fertilizer Hold 2020.SE SAR 77.60 80.60 8,954 24.5x 22.7x 18.1x 16.3x-22%12%4.3%5.0%Non-covered Yara N/R YAR.OL NOK N/C 371.30 11,023 12.6x 10.3x 6.9x 6.0 x 45%16%3.3%4.4%Israel Chem N/R ICL.TA ILS N/C 16.55 5,978 11.5x 10.5x 6.9x 6.7x 12%3%4.5%4.7%K&S AG N/R SDFGn.DE EUR N/C 12.56 2,678 14.8x 10.8x 7.8x 6.8x 19%14%2.7%3.7%Median 17.5x 15.4x 9.1x 7.7x 13%18%3%3%China Xinyangfeng Buy 000902.SZ CNY 14.11 8.84 1,629 10.8x 9.4x 6.2x 5.3x 27%16%2.8%3.2%Sinofert Holdings Ltd Buy 0297.HK HKD 1.08 0.80 717 8.8x 9.5x 4.8x 5.2x 15%-7%2.8%2.6%Zangge Holding Co Ltd Buy 000408.SZ CNY 9.93 8.40 2,365 12.0 x 10.3x 7.4x 6.0 x 5%14%0.0%0.0%China BlueChemical Buy 3983.HK HKD 2.54 1.80 1,188 12.3x 9.1x 7.0 x 5.5x-46%17%4.4%5.9%Qinghai Salt lake Reduce 000792.SZ CNY 2.28 9.75 3,836 N/A 17.6x 10.4x 7.0 x 178%13%0.0%0.6%Non-covered Luxi Chemical group N/R 000830.SZ CNY N/C 9.46 1,957 7.1x 5.9x 5.5x 4.3x-23%28%2.6%3.4%Yunnan Yuntianhua N/R 600096.SS CNY N/C 5.20 1,048 22.9x 13.9x N/A N/A N/A N/A N/A N/A Shandong hualu Hengsheng N/R 600426.SS CNY N/C 16.21 3,723 9.9x 9.0 x 6.3x 5.8x-11.9x 8.6x 1.2%1.3%Median 10.8x 9.5x 6.2x 5.3x 5%14%2.6%2.6%Source:Refinitiv Datastream,HSBC estimates for covered stocks,Bloomberg for NR stocks.Prices as of 18 Oct 2019 Read across Fertilizers 101 Will EM demand ever offset DM oversupply?10 Oct 2017 Global Agribusiness-Sowing the seeds of growth 27Jan 2019 Global Agribusiness-Indias budget and its global impact on Agchem-4 February 2019 Global Agribusiness-African Swine Fever Playbook-1 May 2019 Global Agribusiness-Can bad weather save commodity prices from trade war and ASF?-3 June 2019 Global Agribusiness-Potash:Many have lost but can the few win?-10 July 2019 China Fertiliser-Initiate coverage:Harvesting the fruits of bigger farms-10-Jul-19 China Fertiliser-Beijing trip takeaways:Supply-side reform of phosphate fertiliser-18 July 2019 Saudi Arabian Fertilizer-Hold:Disruption in fuel supply to have limited impact-19 September 2019 India agro-inputs-2QFY20 preview:Excess rainfall offsets good sowing-18 Oct 2019 OCI-Buy:Fertiglobe boosts the deleveraging process,22 October Equities Chemicals 21 October 2019 6 Urea supply dynamics Net urea capacity additions are expected to be the lowest in almost a decade in 2020 with CRU predicting net capacity closures of 700kt.This includes c3.6mt of new capacity additions and 4.3mt of capacity closures.Outside China,only two new plants are expected to come online(the Ramagundam plant in India and Lordagan in Iran,with 1.3mt of capacity each and reportedly at advanced stages of completion).In 2020,a strong rebound in demand could work down the current above-normal inventory levels and tighten supply further.Over the next couple of years,we believe the limited new capacity additions and consistent demand growth should lead to supply constraints and warrant substantially higher utilization rates from existing plants that should lift prices.What are the constraints?Low-cost,export-oriented producers like Russia,the Middle East and North Africa are already operating at close to full utilization and in some cases above 100%levels;hence we see limited scope for meaningful production increases in these regions.Iranian sanctions restrict trade flow and cast uncertainty on new capacity additions.There is a possibility that the Iranian plant might be delayed or operate at suboptimal levels even after commissioning as the markets willing to accept Iranian volumes are limited.Indias 2019 production was affected due to a regulatory cap on naphtha-based plants and water scarcity in some regions.We expect production to recover in 2020 and expect utilization rate to hit 96%(+6%),including the new capacity expected to come online.Recently gas prices were also decreased by up to 12.5%,which favors higher production.Higher utilization rates leave limited room for further upside.North America is operating at close to optimum utilization after discounting the flexible capacity.Hence,to achieve higher urea production,companies have to switch production away from other product categories.Remember,in 2019,som