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1、Research Report 2013 Agricultural Sector Investment Strategy : First Seed, then Breeding DING Pin (Chief Analyst) SAC Certificate No.: S0850511050001 XIA Mu (Analyst) SAC Certificate No.: S0850512090002 Haitong Securities December 12, 2012 Summary 1.Review of the Performance of Agricultural Stocks i
2、n 2012g 2.Seed Sector Deserves Most Attention in Agricultural Sector for 2013 3Poultry 2) Lets look at the situation abroad. Soaring feedstuff prices saw biggest loss in 14 years so that American farmers have been slaughtering live hogs at the fastest rate since 2009, meaning the quantity of live ho
3、gs on hand will decrease rapidly, pork price will rebound andgqygpy, pp prices of imported pork may go up in 2013; 3) The specific time point remains to be seen. Leading indicators of practical rebound of pork)ppgpp price: 1) Loss of the entire sector; 2) a trend of decreasing quantities of sows and
4、 live hogs on hand; 3) proportion of sows/live hogs preferably below 10%. By then, we suggest focusing on Chuying Agro-Pastoral (002477) and Muyuan Food which is about to be listed (time to be determined) . Please read the disclaimers following this report. 7 3. Then Breeding A breeding cycle lasts
5、for 3 to 4 years, which is difficult to change. National Price of Live Hogs (RMB/KG) National Price of Piglets (RMB/KG) Sources: Wind, Haitong Securities Research Institute 8 Please read the disclaimers following this report. 3. Then Breeding Comparison between Chuying Agro-pastoral (002477) and Muy
6、uan Food Chuying Agro-pastoralMuyuan Food 1 02mn hogs for 20110 61mn hogs for 2011 Slaughtering Rate 1.02mn hogs for 20110.61mn hogs for 2011 1.60mn hogs expected for 20121.00mn hogs expected for 2012 Mode of Ei Companies + farmers Industrialized breeding is realized with a hi hdfttiExpansion Compan
7、ies farmers higher degree of automation Level of BreedingLarge-scale pig farmsHigher than Agro-pastoral Sales RevenuesRMB1.3bnRMB1.134bn Profits RMB429mnRMB3.57mn PE21x? 9 Please read the disclaimers following this report. Sources: Wind, Haitong Securities Research Institute 4. Opportunities will Em
8、erge in Aquaculture Sector during Spring Fishing Season Opportunities will emerge in aquaculture sector during the spring fishing season: Due to a larger quantity of south sea cucumbers this spring, the price has maintained at a low level during the spring fishing season, and even a lot of south sea
9、 cucumber culturists have suffered great losses. We believe that under the constraints of cobweb effect, In 2013 the quantity of south sea cucumbers cultured will decrease and the impacts on prices will be reduced to a certain extent during the spring fishing season.ppgpgg The YoY price performance
10、will become pleasing as well. Therefore, from a perspective of prices, opportunities will emerge in the aquaculture sector during the spring fishing season We s ggest that attention is paid to Zhang idao (002069)hose share price hasseason. We suggest that attention is paid to Zhangzidao (002069) , w
11、hose share price has dropped greatly as a result of unfavorable news this year and Homey (600467)with stronger performance flexibility. 10 Please read the disclaimers following this report. 5. Stock Selection: 4 Ideas There are 4 ideas for stock selection: 1) Present1Q2013: Seed sector. The sector h
12、as shown a high degree of activity and flexibility. Denghai Seeds (002041) is expected to generate performance beyond prior market expectations (we expect its performance to grow over 10% in 2012 and over 50% in 1Q2013) . Also, from a perspective of stability, we recommend Longping Hi-tech (000998)
13、; 2) April-May 2013: Aquaculture sector. Through observation of the prices during the spring fishing season, we believe that stage opportunities may emerge in the aquaculture sector. Homey (600467) and Zhangzidao (002069) . 3) 2H2013: Breeding sector. The sector will see an inflection point. Chuying
14、 Agro-pastoral(002477) and Muyuan Food, always as leaders in the sector; New hope (000876) and Sunner Development (002299), with their share prices dropping greatly at early stage and lifting of the ban on their non-()pppg gyygg tradable shares. 4) 3Q2013: Feed sector. Changes of earnings of the fee
15、d sector lag behind the breeding sector by 3 to 6 months. Dabeinong (002385). Please read the disclaimers following this report. 11 6. Key Recommendation: Denghai Seeds The Company is expected to achieve over 10% growth in its performance, exceeding market expectation. We are of the view that its pe
16、rformance for 1Q2013 is also worth expectation and we judge that its performance will grow by over 60% at least: 1) Accelerated growth in areas where 335 is promoted to be sowed in the new sales season will be the direct push hand for enhanced and even better than expected performance Wewill be the
17、direct push hand for enhanced and even better-than-expected performance. We judge that the sales will growth by over 15% YoY, mainly because: a) Preliminary grassroots research results showed that most 335 distributors have had)y g optimistic expectations; b) Advances from customers are very good; c
18、) Competitors have started to grab the market as a new sales season begins; d) Currently, still no seed variety can fully surpass 335 on the market； e) DuPont has gone through benign adjustments voluntarily. 12 Please read the disclaimers following this report. 6. Key Recommendation: Denghai Seeds (
19、002041) 2) Continued heavy volume of Denghai 605 at a fast rate is the biggest guarantee for its continuously boosted performance:p We estimate that the areas where Denghai 605 is promoted to be sowed in the past sales season was appropriate between 5.00mn and 5.50mn mu. Due to good field performanc
20、e in 2012, we predicate that the areas where Denghai 605 will be promoted to be sowed in the new sales season will be between 9.00mn and 10.00mn mu, up about 60% YoY. 3) Old varieties No. 9 and No. 11 of Denghai will contribute to the sales volume： Such old varieties were sold in a small quantity in
21、 2011 due to frost damage. While the seed production occurred normally in 2012, they will take a share in the sales volume in a new sales season. At the same time, as Jingke 968, a new variety of seeds will be launched on the market in 4Q2012, a it is expected that they will be promoted to be sowed
22、in 0.80mn-1.00mn mu areas. 4) Subsidiaries of the Company are expected to generate better-than-expected performances: Allb idiihhididth i2012t Dh i PihihAll subsidiaries have achieved rapid growth in 2012 except Denghai Pioneer whose earnings have declined. Denghai Liangyu deserves particular attent
23、ion. Due to excellent performances of Liangyu 88 and 208, it is expected that its earnings will grow by over 100% in 2012. Please read the disclaimers following this report. 13 6. Key Recommendation: Denghai Seeds (002041) Earnings forecast: 2012-2014 EPS, RMB0.73, RMBb0.95 and RMB1.19 tilrespective
24、ly. Investment suggestion: Buy. Target price is RMB26, corresponding to 27x PE 2013. Uncertain factors: the planting areas of Denghai 605 and Pioneer Corn Seed 335 lower than expected; natural disasters.Seed 335 lower than expected; natural disasters. 14 Please read the disclaimers following this re
25、port. Analysts StatementAnalysts Statement Rh tf AiltStResearch team of Agriculture Sector: Chief Analyst of Agriculture, Forestry, Animal Husbandry and Fishery Sector: DING Pin SAC Certificate No.: S0850511050001 Telephone: 010-23219405 Email: gp Contact Person: XIA Mu, CFA, FRM SAC Certificate No
26、.: S0850512090002 Telephone: 021-23219748Telephone: 021-23219748 Email: 15 Please read the disclaimers following this report. Disclaimers This report is to be used solely by the clients of Haitong Securities Co Ltd (hereinafter referred to as the “Company“). The Company will not deem any other pers
27、on as its client notwithstanding his receipt of this report. Under no circumstances shall the information contained herein or the opinions expressed herein form an investment recommendation to anyone. Under no circumstances shall the Cb h ldibl fld bhfhi bCompany be held responsible for any loss cau
28、sed by the use of any contents herein by anyone. The materials, opinions and estimates contained herein only reflect the judgment of the Company on the very day this report is released. The prices, values and investment returns of the securities or investment instruments referred to herein may fluct
29、uate. At different periods, the Company may release reports which are inconsistent with the materials, opinions and estimates contained herein. Investing in any asset class in the market bears risk; holding a cautious attitude is necessary. The materials, opinions, and estimates contained herein is
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32、. Weay a so p ov devest e t banking and other financial services for the covered companies. This report is only available for designated clients. In the absence of any prior written authorization by the Company, no part of this report shall be copied, photocopied, replicated or redistributed to any
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