瑞信-亚太地区-投资策略-ESG投资策略：塑料2.0时代-2019.3.20-108页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.20 March 2019 Asia Pacific/Australia Equity Research Investment Strategy ESG Investment Strategy The Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients.Research Analysts Phineas Glover 61 2 8205 4448 phineas.glovercredit- April Lowis 61 2 8205 4228 april.lowiscredit- Arnab Mitra 91 22 6777 3806 arnab.mitracredit- Deidy Wijaya,CFA 62 21 255 37902 deidy.wijayacredit- Michael Shen 852 2101 6711 michael.shencredit- Warayut Luangmettakul 662 614 6214 warayut.luangmettakulcredit- A-Hyung Cho 82 2 3707 3735 a-hyung.chocredit- Hoonsik Min 82 2 3707 3761 hoonsik.mincredit- Horace Tse 852 2101 7379 horace.tsecredit- Paworamon(Poom)Suvarnatemee,CFA 66 2 614 6210 paworamon.suvarnatemeecredit- Farhan Rizvi,CFA 65 6212 3036 farhan.rizvicredit- CONNECTIONS SERIES The Age of Plastic 2.0:APAC value chain In this next installment of the Age of Plastic series,we focus on the APAC value chain of plastic,covering petrochems,FMCGs and retail.A real plastic crisis.We assess the most recent marine leakage data to develop a proprietary view of current trends out to 2050.We find a concerning increase in leakage until as late as 2025,reaching 193 MMT globally of which 143 MMT is in Asia.We also forecast a total cumulative 180 MMT of stranded plastic waste exports by 2030,following China Sword that is being exported to other countries with nascent waste systems.Plastics-in-Transition.Given these trends,we have developed a Plastics-in-Transition framework to understand stock-level impacts in a scenario in which plastic waste is addressed in a more comprehensive and urgent way.We apply this model to 25 companies under our Asia Pacific coverage,considering business model competitive advantage,pricing power,government policy,and changing consumer and business behaviours.Portfolio implications.Petrochems face the largest EBIT risk resulting from low pricing power with FMCGs.LG Chem,Lotte Chemical Titen,JG Summit,and Sinopec Shanghai face the highest EBIT impact at-21%,-20%,-11%,and-11%,respectively.To IVL,we apply a higher growth rate in r-PET,making it our favoured exposure to petrochems.In retail,CPALL is further ahead on plastic reduction,resulting in a structural cost advantage of 2%of EBIT vs BJC and MAKRO,and is our favoured exposure to retail.In FMCGs,higher pricing power and better practices result in Amorepacific,Hindustan Unilever,and Nestle India,all being better positioned than peers.GOCP and DABU are likely to face the highest EBIT impact of-6%in FY20E.Figure 1:Global marine leakage to rise until 2025 Figure 2:Precipitating urgent policy action Source:Credit Suisse Estimates using Jambeck et all data 2014 Source:Credit Suisse estimates 020406080100-200 400 600 800 1,000 1,200201020152020202520302035204020452050MMt/yMMTPlastic in Transition annual leakage(RHS)Current rate annual leakage(RHS)Current rate cumul.leakage(LHS)Plastic in Transition cumul.leakage(LHS)0204060801001201400100200300400500600700800900199419992004200920142019F2024FNew policies per year(RHA)Cumulative policies total(LHA)20 March 2019 ESG Investment Strategy 2 Table of contents Focus charts 3 Winners and losers in the age of plastic 4 The rise of plastic.4 Marine leakage continues to grow out to 2025.4 Stranded plastic waste higher than expected.4 Plastics in transition framework.4 Portfolio implications.4 The age of plastic 6 The ubiquitous rise of plastics.6 A wasted resource.7 And an intractable environmental dilemma.9 No longer someone elses problem.12 Attracting the attention of policymakers in APAC.15 And a more environmentally aware consumer society.20 The APAC value chain 23 Introducing our Plastics in Transition framework.23 Petro-chemicals.25 FMCG personal goods.41 FMCG food producers.54 Retailers.71 Appendix 89 20 March 2019 ESG Investment Strategy 3 Focus charts Figure 3:Projected increases in plastic waste generation and recovery by 2050 Figure 4:Production growth of plastic vs other bulk materials and global GDP(index 1971=100)Source:Geyer et al,2017,Credit Suisse estimates Source:IEA,Credit Suisse estimates Figure 5:Current estimated rate of leakage vs the Plastic in Transition scenario Figure 6:Estimated global displaced plastic waste following China Sword policy Source:Credit Suisse Estimates using Jambeck et all data 2014 Source:UN Comtrade data,Credit Suisse estimates Figure 7:The growth in global plastic waste policy Figure 8:Biggest EBIT impact is in petrochemicals Source:Credit Suisse estimates Source:Company data,Credit Suisse estimates 05,00010,00015,00020,00025,00030,00035,0001950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050MtGeneratedDiscardedIncineratedRecycled0200400600800100012001971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015PlasticCementAluminiumGDPAmmoniaSteel020406080100-200 400 600 800 1,000 1,200201020152020202520302035204020452050MMt/yMMTPlastic in Transition annual leakage(RHS)Current rate annual leakage(RHS)Current rate cumul.leakage(LHS)Plastic in Transition cumul.leakage(LHS)0501001502002503001991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030MMTDisplaced plastic by 2030=180 MMTForecastwithout China Sword0204060801001201400100200300400500600700800900199419992004200920142019F2024FNew policies per year(RHA)Cumulative policies total(LHA)-25%-20%-15%-10%-5%0%5%201920202021202220232024202520262027051910.KS0338.HKIVL.BKPTTGC.BKPCGB.KLLOTT.KLJGS.PS 20 March 2019 ESG Investment Strategy 4 The age of plastic in a time of transition The rise of plastic Plastic is now the most prolific material on the planet.Its production has grown faster than that of any other group of bulk materials over the last 33 years.On this trajectory,34,000 Mt of plastic will have been produced by the end of 2050 and there will be more plastic in the ocean than fish in weight.The dominant story of plastic is the inexorable rise in plastic packaging,now at 40%of global plastic use,accelerated by the shift to single-use functions.Vast resource value is lost in this process:95%of US$80bn120bn plastic packaging material value is lost annually to the economy after a short first use.Marine leakage continues to grow out to 2025 This creates an intractable environmental dilemma.None of the commonly used plastics are biodegradable,and near-permanent contamination of the natural environment is a pervasive outcome.We assess the most recent marine leakage data to develop a proprietary view of current trends out to 2050.Given the lead time to developing waste management infrastructure,we find a concerning increase in marine leakage in line with the current rate until as late as 2025,reaching 193 MMT globally,of which 143 MMT is in Asia.Stranded plastic waste higher than expected We update prior assessments of the total plastic waste that would have been destined for China prior to the National Sword policy using the most recent UN Comtrade data and find a worse-than-expected trend.We forecast the total cumulative weight of stranded plastic waste imports that will either have to be processed domestically or now be exported to other countries with nascent waste management infrastructure as 180 MMT by 2030.Plastics-in-Transition framework We have developed a proprietary Plastics-in-Transition framework to understand sector and stock-level impacts in a scenario in which plastic waste is addressed in a much more comprehensive and urgent way.We apply this scenario to 25 companies under our Asia Pacific coverage across petrochemicals,FMCG personal product,FMCG food products,and retailers.Our model takes account of business model competitive advantage,pricing power through the value chain,policy and changing consumer and business behaviours.Portfolio implications Petrochems face the largest downside earnings risk.LG Chem,Lotte Chemical Titen,JG Summit,and Sinopec Shanghai face the highest EBIT impact at-21%,-20%,-11%,and-11%respectively(base case).For IVL,we factor in a higher growth rate in its r-PET business,contributing to increasing pricing power.By FY24,its first mover advantage in r-PET would already have more than offset the 5%tax on fossil-based virgin resins.IVL is our favoured exposure to petrochems.Retailers face the second-largest EBIT downside risk.E-MART and Siam Makro face the highest EBIT impact at-5%and-3%,respectively,under our base-case scenario in FY20,and-9%and-7%,respectively,under our worst-case scenario.CPALL is further ahead on the plastic reduction initiatives than its peers,resulting in a structural cost advantage of 2%of EBIT vs BJC and MAKRO,and is our favoured exposure to retail.At FMCG Food Producers,analysts factored in strong pricing power and cost pass-through,resulting in limited EBIT impact.Britannia Industries and Vietnam Dairy faced the highest exposures and Nestle India was identified as the sector leader.We found lower pricing power and a less elastic response from consumers in FMCG Personal Goods.Godrej Consumer and Dabur India face the highest EBIT impact of 6%in FY20(worst case).Our order of preference is Hindustan Unilever(pricing power),followed by Amorepacific(already at 28%non-virgin feedstock plastic packaging content and a clear regional leader).20 March 2019 ESG Investment Strategy 5 Figure 9:Key company exposures to Credit Suisses Plastics in Transition scenario Ticker Company Base case Worse case Porters 5 forces Summary Rating%goods impact Peak impact(%EBIT)EBIT impact vs industry Peak impact(%EBIT)EBIT impact vs industry Compet.rivalry Threat of substitute Market power-suppliers Threat of new entry Market power-buyers Petrochemical producers JGS.PS JG Summit 75%-11%88%-12%74%2 3 3 1 3 High%of goods with medium impact;45-50%pass through levels;peak impact in 2020-21;medium threat of substitution.051910.KS LG Chem Ltd.50%-21%200%-22%163%4 4 3 4 3 Medium%of goods with significant impact;45-50%pass through levels;peak impact in 2025;high threat of substitution.0338.HK Sinopec Shanghai 13-15%-11%137%-18%152%2 1 1 4 3 Small%of goods with high impact;45-65%pass through levels;peak impact felt in 2019;low threat of substitution.PCGB.KL Petronas Chemicals 13%-2%22%-2%20%5 2 1 4 2 Low%of goods with low impact;20-50%pass through levels;peak impact felt in 2019-20;low threat of substitution.PTTGC.BK PTT Global Chemical 17%-7%72%-8%60%5 2 1 4 2 Low%of goods with medium impact;30-40%pass through levels;peak impact felt in 2020;low threat of substitution.IVL.BK Indorama Ventures 50%-8%18%-15%97%3 2 2 3 3 Medium%of goods with medium impact;55-60%pass through levels;peak impact felt in 2020;low threat of substitution.LOTT.KL Lotte Chemical Titan 62%-20%163%-21%134%5 2 2 4 2 Medium to high%of goods with medium impact;35-40%pass through levels;peak impact felt in 2020;low threat of substitution.FMCG:Personal products 051900.KS LG Household&Health 100%-2%89%-3%52%4 1 5 4 3 Very high%of goods with medium impact;95-97%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.090430.KS Amorepacific Corp 100%-2%57%-3%77%4 1 5 4 3 Very high%of goods with medium impact;95-98%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.GOCP.BO Godrej Consumer Prod 100%-5%174%-6%146%3 1 5 2 3 Very high%of goods with high impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.DABU.BO Dabur India 90%-3%105%-6%144%3 1 5 2 4 High%of goods with high impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.HLL.BO Hindustan Unilever 80%-2%75%-3%80%4 1 5 2 4 High%of goods with medium impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.FMCG:Food products NEST.BO Nestle India 80%-2%120%-2%98%4 1 5 1 4 High%of goods with low-medium impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.BRIT.BO Britannia Industries 100%-3%221%-5%176%3 1 5 2 3 High%of goods with high impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.ICBP.JK Indofood CBP 100%-1%73%-2%88%2 2 4 1 5 High%of goods with low impact;95-100%pass through levels;peak impact felt in 2021;high market power with suppliers and high with buyers.VNM.HM Vietnam Dairy 100%-2%148%-3%115%3 4 2 3 3 High%of goods with medium impact;95-100%pass through levels;peak impact felt in 2020;low market power with suppliers and medium with buyers.FB.PS San Miguel Food and Bev 12%0%12%0%19%5 4 4 3 4 Low%of goods with very low impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.000895.SZ Henan Shuanghui 47%-1%69%-2%129%2 3 3 2 2 Medium%of goods with low impact;95-100%pass through levels;peak impact felt in 2027;medium market power with suppliers and low with buyers.CPF.BK Charoen Pokphand 20%-1%56%-2%75%5 5 3 4 5 Low%of goods with low impact;95-100%pass through levels;peak impact felt in 2020;medium market power with suppliers and high with buyers.Retailers 139480.KS E-MART 60%-5%223%-9%183%2 4 5 2 3 Medium%of goods with high impact;90-95%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.PGOLD.PS Puregold Price Club 7%0%15%0%18%4 4 4 4 4 Low%of goods with very low impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.RRHI.PS Robinsons Retail Hol.8-10%0%15%0%19%4 4 4 4 4 Low%of goods with very low impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.CPALL.BK C.P.ALL PCL 100%-1%44%-4%70%2 4 4.5 3 4 High%of goods with medium impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and high with buyers.BJC.BK Berli Jucker 100%-1%67%-4%83%5 4 4 3 3 High%of goods with medium impact;95-100%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.MAKRO.BK Siam Makro PCL 100%-3%193%-7%177%5 4 4 2 3 High%of goods with high impact;98-100%pass through levels;peak impact felt in 2020;high market power with suppliers and medium with buyers.Source:Credit Suisse Research 20 March 2019 ESG Investment Strategy 6 The age of plastic The ubiquitous rise of plastics Half of the plastics ever produced were made in the last 13 years