麦格理-中国-农业行业-中国农业：猪年丰收之年-2019.2.12-59页.pdf

Please refer to page 57 for important disclosures and analyst certification,or on our website February 2019 Greater China EQUITIES Inside HK/China consumer valuation table 2 Hog price poised to rally in 2H19;ASF will intensify this hog cycle 4 Broiler prices remains high due to supply shortage 16 Feed outlook:mild growth of corn prices,uncertain soymeal prices 21 Appendices terminology of hog industry 24 WH Group/Shuanghui Prefer WH to Shuanghui 25 Yum China Holdings 28 MacVisit:Fujian Sunner 32 MacVisit:Wens Foodstuff 37 MacVisit:Muyuan Foodstuff 41 MacVisit:New Hope Liuhe 45 MacVisit:COFCO Meat 48 MacVisit:Guangdong Haid 53 Analysts Macquarie Capital Limited Linda Huang,CFA +852 3922 4068 Terence Chang +852 3922 3581 Sunny Chow +852 3922 3768 Cici Yu +86 21 2412 9078 Hugo Shen +86 21 2412 9077 China agriculture industry A fruitful pig year Key points Hog prices poised to rally in 2H19;ASF will intensify this hog cycle.Broiler prices to remain high due to short supply.Feed outlook:mild growth of corn prices,uncertain soybean meal prices.We visited six listed companies in the field of agriculture recently and thus provide our 2019 outlook for Chinas agriculture industry.Based on Macquaries supply&demand model,we believe hog prices are well poised for a rally in 2H19 and that broiler prices will remain high,due to tight supply.On the back of little pressure from feed costs,we believe 2019 will be a fruitful Year of the Pig for hog and broiler producers in China.Hog price poised to rally in 2H19;ASF will intensify this hog cycle The National Bureau of Statistics announced a reported 8.3%YoY decrease in sow stock at the end of 2018.Our industry checks with feed producers nationwide indicated a more severe decline at 10%YoY.In addition to the ongoing Africa Swine Fever(ASF)preventing restocking,we estimate an 8.1%decrease in total supply and 3.6m-ton shortage if assumed 2%demand decline.Based on our sensitivity analysis,each 1%growth on the demand side will lead to a 0.55m-ton pork supply shortage.We believe pork prices will bottom in 2Q19,then pick up in 2H19.Moreover,we think the ongoing ASF will last for a long time,which will intensify and prolong this hog cycle.Broiler price remains high due to supply shortage Chinas white-feathered boiler production relies mainly on imported grandparents.Given the lingering shortage of imported grandparent stock,Macquarie broiler supply and demand model projects a 3%increase of supply in 2019.On the demand side,we believe consumption will also pick up slightly,with 3%YoY growth in 2019 due to concerns on ASF and the substitution effect of pork as hog prices pick up in 2H19.Therefore,we believe broiler prices will remain high in 2019,with resulting gross margin pressure for the downstream companies,such as Shuanghui and YUMC.Feed prices outlook:mild growth of corn,uncertain soymeal Feed costs comprise 60-70%of hog production COGS and 60-65%of broiler production COGS.Corn and soybean meal are the two key raw materials for both hog and broiler feed.In 2019,we believe the corn price will see mild growth,driven by supply shortage.Post a dramatic 2018,soymeal prices,while still uncertain due to the trade war,are unlikely to further rise in 2019 due to 4.4%growth in Brazils exports,which made up 75%of Chinas 2018 soybean imports,based on USDAs latest projection.Overall,we see limited feed cost pressure.Recommendations In upstream,hog and broiler producers should benefit from price hikes and limited pressure from feed costs in 2019.Hog cycle is longer than broiler cycle.As for downstream,we prefer WH Group(288 HK,HK$6.79,Outperform,TP:HK$8.90)to Shuanghui(000895 CH,Rmb25.11,Neutral,TP:Rmb22.40),given that we believe the US fresh pork business is on track to recovery,while China business will be under margin pressure from high broiler and hog prices.We maintain our Neutral on YUMC(US$41.66,TP:US$34.50)due to commodity price pressure and market competition.Macquarie Research China agriculture industry 12 February 2019 2 HK/China consumer valuation table Fig 1 HK/China consumer valuation table(1)Company Code Price Rating TP Upside Mkt Cap P/E(X)P/B(X)ROE(%)EPS Growth(%)PEG Div yield(%)FCF yield(%)(lcy/sh)(lcy/sh)(%)US$m 2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E 2019E 2018E 2019E 2018E 2019E Department stores Golden Eagle 3308 HK 8.25 OP 11.70 42%1,788 10.7 9.8 1.8 1.7 17.7 17.8-13.2 8.8 1.1 4.4 4.7 5.4 0.4 Lifestyle 1212 HK 11.50 OP 17.50 52%2,241 9.8 8.9 3.9 3.2 42.5 39.3 38.8 11.0 0.8 5.1 5.1 9.7 8.1 Luxury Samsonite 1910 HK 22.80 UP 18.40-19%4,231 20.2 18.0 2.3 2.2 15.4 13.5 5.7-8.3-2.2 1.9 2.1-1.1 1.8 Prada 1913 HK 24.95 OP 43.00 72%8,499 20.5 18.2 2.3 2.2 11.6 12.1 39.1 12.7 1.4 3.1 3.5 4.4 3.7 Chow Tai Fook 1929 HK 6.85 Neutral 5.70-17%8,619 16.7 15.6 2.0 2.0 12.6 12.9 36.3 7.3 2.1 8.2 4.7-2.8 4.0 Luk Fook 590 HK 22.45 UP 18.80-16%1,662 9.6 9.0 1.3 1.2 14.5 14.0 34.8 7.0 1.3 3.8 4.6 2.8 0.3 Chow SangSang 116 HK 11.42 OP 22.70 99%988 6.9 6.0 0.7 0.7 10.6 11.2 46.7 14.3 0.4 5.8 6.5 15.4 15.4 Lao Feng Xiang 600612 CH 42.70 OP 62.00 45%2,730 15.2 13.2 3.3 2.8 23.0 22.9 13.8 15.2 0.9 2.4 2.9-15.7 30.2 Sportswear Anta Sports 2020 HK 40.90 OP 42.00 3%13,762 22.8 19.0 6.1 5.4 28.3 30.1 33.3 20.0 1.0 3.3 4.0 3.5 4.1 Li Ning 2331 HK 9.78 Neutral 9.20-6%2,759 29.1 22.4 3.5 3.0 12.7 14.5 33.9 30.1 0.7 0.0 0.0 1.8 4.2 Cosmetics SaSa 178 HK 2.94 Neutral 2.80-5%1,133 20.1 17.9 3.6 3.7 18.7 20.3 30.8 12.3 1.5 6.2 6.4 6.8 2.0 L Occitane 973 HK 13.94 Neutral 13.70-2%2,655 23.5 21.5 2.4 2.3 10.4 10.9-26.9 9.2 2.3 1.9 2.0 4.5 4.9 Shanghai Jahwa 600315 CH 27.87 UP 20.20-28%2,829 43.1 45.4 3.2 3.0 7.8 6.9 33.2-5.2-8.8 1.4 1.5 1.3-2.4 Home appliance retailers GOME 493 HK 0.65 UP 0.40-38%1,842 NA NA 0.7 0.9-5.2-3.3 107.6-51.7 NA 0.0 0.0-15.0-21.7 Suning 002024 CH 10.88 Neutral 14.00 29%14,832 1,468.0 156.3 1.3 1.3 0.1 0.8-143.4 839.0 NA 0.9 0.1 0.0 0.0 Haier Electronics 1169 HK 21.90 OP 21.80 0%7,595 13.4 12.1 2.2 1.9 17.5 16.9 16.4 10.8 1.1 1.2 1.7 2.3 5.9 Qingdao Haier 600690 CH 15.55 OP 17.20 11%14,445 14.2 12.7 2.4 2.1 18.4 17.4 18.4 12.6 1.0 2.4 2.6-1.9 14.6 Midea Group 000333 CH 42.10 OP 50.00 19%41,345 14.0 12.7 3.2 2.7 24.3 23.1 24.8 10.4 1.2 3.2 3.6 10.1 7.4 Gree 000651 CH 40.70 Neutral 39.00-4%36,507 8.8 9.4 2.7 2.3 36.0 26.8 31.8-6.5-1.4 4.4 4.3 11.3 10.6 Hanzhou Robam 002508 CH 24.65 Neutral 18.90-23%3,503 15.8 13.5 3.8 3.3 26.1 26.3 5.3 17.1 0.8 3.1 3.5 6.7 6.4 Home improvement Man Wah 1999 HK 3.78 Neutral 3.50-7%1,867 10.9 10.3 2.4 2.1 24.2 21.7-10.3 6.0 1.7 6.7 3.4 6.0-0.3 OEM Shenzhou 2313 HK 90.80 OP 103.40 14%17,624 24.6 20.8 5.3 4.7 22.8 24.0 22.2 18.6 1.1 1.8 2.2 3.4 3.5 Stella Intnl 1836 HK 10.00 OP 13.00 35%1,015 18.2 11.6 1.1 1.1 5.8 9.1-10.2 56.7 0.2 3.5 5.7 6.0 6.0 Pacific Textile 1382 HK 6.87 OP 9.10 39%1,238 13.4 10.3 3.0 2.8 22.8 28.2-20.0 29.9 0.3 6.3 8.0 4.0 6.9 Li&Fung 494 HK 1.34 OP 1.91 50%1,464 9.8 8.4 0.6 0.6 5.6 7.1 6.1 17.0 0.5 7.3 8.5-6.1 8.5 Yue Yuen 551 HK 26.15 OP 27.50 5%5,349 16.4 13.2 1.3 1.2 7.8 9.6-33.1 24.4 0.5 5.7 5.7 1.4 2.3 Tourism CITS 601888 CH 54.40 OP 71.40 31%16,183 33.3 24.4 6.6 5.5 21.1 24.6 26.4 36.3 0.7 1.0 1.2 2.6 3.9 CYTS 600138 CH 12.74 OP 14.50 14%1,383 14.6 14.9 1.5 1.4 10.7 9.5 9.8-2.3-6.6 0.8 0.8 17.2-10.0 Restaurant and supply chain YUM China YUMC US 35.89 Neutral 34.50-4%13,499 20.1 20.7 4.8 4.0 25.1 21.3 73.3-2.7-7.6 0.5 0.8 5.6 4.0 Caf de Coral 341 HK 20.85 OP 23.90 15%1,575 26.5 22.7 3.4 3.5 13.0 15.3-9.4 16.7 1.4 5.5 3.9 3.6 3.5 Xiabu Xiabu 520 HK 11.20 OP 15.00 34%1,567 22.5 18.4 4.5 3.9 21.7 23.1 9.5 22.6 0.8 2.9 3.0 6.4 2.3 Gourmet Master 2723 TT 213.00 Neutral 250.00 17%1,239 17.9 18.3 3.4 3.1 23.2 19.9 22.8-2.1-8.8 2.7 2.5 5.2 5.9 Yihai 1579 HK 23.45 Neutral 18.20-22%3,084 44.6 31.4 10.9 8.4 27.6 30.3 81.0 42.0 0.7 0.8 1.2 0.5 2.4 Haitian 603288 CH 72.47 OP 69.00-5%29,301 45.3 37.9 14.1 12.0 33.7 34.1 27.8 19.4 2.0 1.1 1.5 2.7 1.9 TCI 8436 TT 440.00 OP 618.00 40%1,408 32.9 24.3 10.1 7.7 34.9 35.8 87.9 35.5 0.7 1.0 1.4 2.1 3.3 Consumer Discretionary-Average ex Suning 20.2 17.4 3.7 3.2 3.2 3.3 3.2 4.2 Source:Bloomberg,Macquarie Research,February 2019;prices as of 30 January 2019 Macquarie Research China agriculture industry 12 February 2019 3 HK/China consumer valuation table(cont)Fig 2 HK/China consumer valuation table(2)Company Code Price Rating TP Upside Mkt Cap P/E(X)P/B(X)ROE(%)EPS Growth(%)PEG Div yield(%)FCF yield(%)(lcy/sh)(lcy/sh)(%)US$m 2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E 2019E 2018E 2019E 2018E 2019E Grocery retailers Sun Art 6808 HK 7.41 OP 11.30 54%9,585 22.3 20.1 2.5 2.3 11.7 12.0-2.9 10.8 1.9 1.7 1.9 2.8 5.1 Lianhua 980 HK 1.33 UP 1.50 13%183 NA NA 0.8 1.1-17.0-19.5 13.6-15.7 NA 0.0 0.0-70.1-48.6 Yonghui 601933 CH 8.21 UP 4.30-46%11,756 78.0 49.4 3.8 3.8 5.0 7.7-42.5 57.8 0.9 1.6 1.9-4.1-3.8 President Chain Store 2912 TT 322.50 Neutral 298.00-8%10,846 31.8 29.5 9.5 8.9 24.5 31.2-66.0 8.0 3.7 2.7 2.9 2.9 3.1 Taiwan Familymart 5903 TT 229.00 OP 225.00-2%1,664 31.0 28.1 9.1 8.5 30.6 31.4 17.2 10.3 2.7 2.8 3.1 2.3 2.5 Consumer staples Want Want China 151 HK 6.16 OP 7.70 25%9,746 21.2 19.0 4.6 4.3 23.3 23.1 N.A 11.3 1.7 2.3 2.5 7.2 5.4 Dali Foods 3799 HK 5.27 UP 4.30-18%8,853 16.5 14.4 4.1 3.5 25.8 26.1 9.1 14.7 1.0 2.9 3.3 4.2 3.4 Tingyi 322 HK 10.28 Neutral 11.30 10%7,321 19.5 17.9 2.5 2.3 13.1 13.3 38.8 9.2 1.9 2.5 2.7 7.7 8.8 WH Group 288 HK 6.74 OP 8.90 32%12,574 14.5 11.4 1.6 1.4 11.3 13.0-24.7 26.8 0.4 3.1 3.9 7.3 8.1 Shuanghui 000895 CH 24.38 Neutral 22.40-8%12,056 16.1 16.3 5.0 4.7 32.5 29.6 15.8-1.6-10.0 5.0 5.0 7.2 6.2 Uni-President China 220 HK 6.74 Neutral 8.50 26%3,734 22.6 20.0 1.9 1.8 8.4 9.2 25.5 12.9 1.5 3.0 3.4 4.6 4.2 Uni President Enterprises 1216 TT 71.90 Neutral 75.20 5%13,390 23.7 21.2 3.9 3.7 15.2 17.7-56.8 12.0 1.8 3.4 3.8 3.2 5.9 Hengan 1044 HK 60.25 UP 51.00-15%9,127 16.8 17.3 3.6 3.4 22.3 20.2-2.3-2.9-5.9 3.8 3.7 5.4 5.2 Moutai 600519 CH 676.00 OP 707.00 7%127,499 25.9 23.8 7.7 6.6 32.5 29.8 20.3 9.0 2.7 1.9 2.1 3.7 4.1 Yanghe 002304 CH 95.78 OP 123.20 32%22,213 18.8 16.4 4.3 3.8 24.2 24.3 25.1 14.4 1.1 3.2 3.6 6.7 6.3 Tsingtao H 168 HK 33.65 Neutral 30.40-8%6,626 40.3 33.9 2.5 2.4 6.4 7.2 15.8 18.7 1.8 1.6 1.9 5.7 4.9 Wuliangye 000858 CH 57.28 Neutral 52.30-6%33,519 17.9 16.5 3.6 3.2 21.2 20.4 26.1 8.5 1.9 2.8 3.0 5.2 5.4 Tsingtao A 600600 CH 37.19 Neutral 39.70 8%6,652 42.2 34.2 2.8 2.6 6.8 7.9 22.0 23.5 1.5 1.3 1.5 5.9 5.0 CRB 291 HK 27.10 UP 20.20-25%11,231 32.9 33.6 4.5 4.2 14.1 13.0 40.2-2.1-16.3 0.8 0.9 2.2 4.8 Dairy&Infant formula China Modern Dairy 1117 HK 0.96 OP 1.34 40%774 6.4 5.6 0.7 0.7 11.4 13.3 80.4 15.4 0.4 0.0 0.0-7.0-1.3 China Mengniu 2319 HK 24.95 UP 16.00-36%12,495 32.4 31.5 3.4 3.1 10.9 10.3 25.3 3.0 10.7 0.7 0.8-0.6 3.7 Bright Dairy&Food 600597 CH 8.31 Neutral 8.00-4%1,524 19.4 17.6 1.8 1.7 9.5 10.0-22.4 10.8 1.6 1.4 1.6-1.2 4.2 Yili 600887 CH 24.10 OP 27.10 12%21,945 25.3 22.9 5.4 5.0 22.2 22.6-2.7 10.3 2.2 2.0 2.2 5.6 2.6 Health&Happiness 1112 HK 45.40 Neutral 44.30-2%3,609 23.1 18.4 4.6 3.7 22.6 22.6 15.2 25.1 0.7 0.0 0.0 6.6 7.2 Yashili 1230 HK 1.32 OP 1.97 49%805 111.1 38.5 1.0 0.9 0.9 2.5-126.9 188.1 0.2 0.0 0.0-10.3 0.3 Greatview 468 HK 4.93 OP 5.20 5%847 15.8 15.1 2.3 2.2 14.7 15.0 4.0 5.0 3.0 5.3 5.3 2.6 6.3 Consumer Staples-Average ex Yashili 2.2 2.4 0.7 2.3 2.2 2.4 0.7 2.3 Source:Bloomberg,Macquarie Research,February 2019;prices as of 30 January 2019 Macquarie Research China agriculture industry 12 February 2019 4 Hog price poised to rally in 2H19;ASF will intensify this hog cycle Given our estimated 10%decrease in sow stock and ongoing ASF preventing restocking,Macquaries China pork supply&demand model now estimates an 8.1%decrease in total supply in 2019,driven by a 10.6%decline in domestic hog production,and we believe hog prices are well poised to rally from 2H19.We prefer upstream hog producers to downstream meat processors,as this price rally should boost upstream companies sales and margins,while downstream meat processor will likely be under gross margin pressure.Players moving towards hog production in hog industry value chain The pork industrial value chain can be categorized into five key divisions:feed production,hog production,slaughtering/fresh pork production,processed meat production,sales and distribution.Hog production starts with the breeding of hogs and continues with farrowing,which is the birth of newborn piglets.Thereafter,piglets are transferred to nurseries and fattening farms where they will become finishing hogs and then sent for slaughter.Hogs are slaughtered in slaughterhouses to produce fresh pork products that are either sold directly or transported as raw materials for further processing of processed meat products.Fig 3 Chinas hog industry value chain Source:COFCO meat,Macquarie Research,February 2019 In the hog industry value chain,downstream meat processors with brand equity and distribution channels enjoyed the best profitability with less volatility.Hog producers come second in terms of margin levels,although volatility is higher as they are directly exposed to the hog cycle.Feed producers profitability is relatively stable,while thin.Lastly,slaughtering houses usually serve as auxiliary facilities for upstream or downstream,whose profitability is suffering from low utilization rate due to the fragmented landscape of hog production.Fig 4 Hog productions higher profitability comes along with higher volatility due to hog cycle Value chain Feed production Hog production Slaughtering Processed meat production and distribution Representative company New hope Liuhe Wens Shuanghui Shuanghui Haid Muyuan Yurun Yurun COFCO Meat COFCO Meat Industry GPM 5%-10%10%-45%5-10%10%-30%Industry NPM 1%-3%3%-40%-5%-5%5%-10%Entry barrier Low High Median High Technology Technology License Brand and product Land reserve Channel Environmental compliance Technology Source:Company data,Macquarie Research,February 2019 Macquarie Research China agriculture industry 12 February 2019 5 Hog production market is fragmented,plenty of room for scaled farms Even though its hog production saw slight moderation post the historical high in 2014,China is still the largest pork producer and consumer in the world,accounting for 48%of global pork production in 2018.Fig 5 China hog production is in a dominant leading position and Chinese ate up almost half of global production Fig 6 China hog production volume and YoY growth Source:Statista,Macquarie Research,February 2019 Source:PRC Ministry of Agriculture(MOA),Wind,Macquarie Research,February 2019 However,Chinas hog production industry is fragmented as small“backyard”farmers with annual capacity less than 500 head account for the majority of producers.According to the PRC Ministry of Agriculture(MOA),a scaled farm is defined as one that could produce 500 head of marketable hogs per year.Small farms still contributed to 50%of total hog production in 2017 vs.74%in 2007,according to the MOA of PRC(link).Fig 7 Small farms still in the dominant position Fig 8 even with the decrease of“backyard”farms sp