Brief Review_Agriculture - Sector trends and pattern _Outperform
Brief Review_Agriculture - Sector trends and pattern _Outperform
Event：
After attending the National Feedstuff Sector Conference in Dalian from July 14-16, we summarize our takeaways from the conference and thoughts on the sector as follows:
Officials' views:
Yao Jingyuan, Chief Economist of the National Bureau of Statistics (NBS), is cautiously optimistic about the macro economy and believes the prices of agricultural produce still have large upside. Her view is echoed by the head of the Feedstuff Sector Association.
Head of the Animal Husbandry Section believes the live pig price will not drop drastically and will perch on a relatively high level, in line with our view.
Overview of the sector and players:
As partly reflected by the record-hitting number of participants in the conference, the feedstuff sector enjoyed boom in 1H08 despite the over 30% cost rise, such as corn, soybean extraction, calcium hydrogenphosphate, but players of difference scales are showing divergent results. The large-sized ones run miles ahead of small ones due to strength in branding, marketing, raw material purchase and R&D.
(1) New Hope Agribusiness (000876): According to Vice President of Shandong Liuhe Group (Liuhe), New Hope Agribusiness, Liuhe and Sichuan Joint-Wit Medical & Pharmaceutical (000809) are working toward eliminating peer competition through consolidation, though the approach is to be finalized. Liuhe may go public separately or injected into the Shenzhen-listed New Hope Agribusiness. Whatever the case, we believe even the separate listing of Liuhe will not affect the injection of related equity into New Hope Agribusiness by the parent New Hope Group and therefore, we are cautiously optimistic on the group listing of the agriculture and animal husbandry assets of the New Hope Group.
(2) Jiangxi Zhengbang Technology (002157): Despite the small scale, the company boasts unique features in the expansion of the live pig industrial chain, esp. in upstream raising. The company may expect rapid profit growth in its 1H08 reports, in our view.
(3) Ningbo Tech-bank Co. (002124): Its general manager pointed out the marked divergence between large-sized players and small ones, esp. in their bargaining power in purchase. The difference is magnified by the surge of raw material prices.
(4) Dalian Zhangzidao Fishery Group (002069): We visited the company on the sidelines of the conference and believe its earnings are very unlikely to miss expectation and even register negative growth. We are considering adjusting the rating for the company.
Event：
After attending the National Feedstuff Sector Conference in Dalian from July 14-16, we summarize our takeaways from the conference and thoughts on the sector as follows:
Officials' views:
Yao Jingyuan, Chief Economist of the National Bureau of Statistics (NBS), is cautiously optimistic about the macro economy and believes the prices of agricultural produce still have large upside. Her view is echoed by the head of the Feedstuff Sector Association.
Head of the Animal Husbandry Section believes the live pig price will not drop drastically and will perch on a relatively high level, in line with our view.
Overview of the sector and players:
As partly reflected by the record-hitting number of participants in the conference, the feedstuff sector enjoyed boom in 1H08 despite the over 30% cost rise, such as corn, soybean extraction, calcium hydrogenphosphate, but players of difference scales are showing divergent results. The large-sized ones run miles ahead of small ones due to strength in branding, marketing, raw material purchase and R&D.
(1) New Hope Agribusiness (000876): According to Vice President of Shandong Liuhe Group (Liuhe), New Hope Agribusiness, Liuhe and Sichuan Joint-Wit Medical & Pharmaceutical (000809) are working toward eliminating peer competition through consolidation, though the approach is to be finalized. Liuhe may go public separately or injected into the Shenzhen-listed New Hope Agribusiness. Whatever the case, we believe even the separate listing of Liuhe will not affect the injection of related equity into New Hope Agribusiness by the parent New Hope Group and therefore, we are cautiously optimistic on the group listing of the agriculture and animal husbandry assets of the New Hope Group.
(2) Jiangxi Zhengbang Technology (002157): Despite the small scale, the company boasts unique features in the expansion of the live pig industrial chain, esp. in upstream raising. The company may expect rapid profit growth in its 1H08 reports, in our view.
(3) Ningbo Tech-bank Co. (002124): Its general manager pointed out the marked divergence between large-sized players and small ones, esp. in their bargaining power in purchase. The difference is magnified by the surge of raw material prices.
(4) Dalian Zhangzidao Fishery Group (002069): We visited the company on the sidelines of the conference and believe its earnings are very unlikely to miss expectation and even register negative growth. We are considering adjusting the rating for the company.
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