2013_AGRICULTURAL_SECTOR_INVESTMENT_STRATEGY：FIRST_SEED_THEN_BREEDING-2012-12-14.ppt

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, 2012,1.,2.,3.,3,4.,5.,6.,2,summary,review of the performance of agricultural stocks in 2012,seed sector deserves most attention in agricultural sector for 2013,poultry & livestock breeding sector is expected to see a stronger rise,in 2h2013,opportunities will emerge in the aquaculture sector during the spring,fishing season,stock selection: 4 ideas,denghai seeds is the key recommendation for the time being,please read the disclaimers following this report.,textilean,nd,纺织,apparel服装,commercial,商业贸易,trade,machinerand,ry,机械ent,设,equipme备,information,信息,service服务,information备,信息设,equipme,ent,黑色metals,ferrous金属,m,agriculture渔,农林牧,light,轻工制,manufact造,turing,mining掘,采,chemica,化al,工,industry,transpor输,rtation,交通运,transpor,rt,交运ent,设,equipme备,cateringand,餐饮,tourism旅游,a-sharea股,全部,electronics,电子,foodand,d,drinks饮料,食品,general合,s,综service,financialservice,金融服务,publicut业,tilities,公用事,construc,ction,andbuild,ding,建筑s,建,materials材,non-ferr,rous,有色,metals金属,electric电器,home,家用ces,applianc,pharmac,ceutical,医药生,biotechn物,nology,realest产,tate,房地,3,1. review of the performance of agricultural stocks in 2012,as of december 11, 2012, agricultural stocks underperformed the a- share market by 6.83% (-10.79% vs. -3.96%) .,15 10,5 0 -5 -10 -15 -20 -25,sources: wind, haitong securities research institute,please read the disclaimers following this report.,4,2. seeds,so far, the seed stocks are actively traded. we believe such an activity will continue till 1h2013:,1) in 2012, leading companies have either maintained high performance growth (longping hi-tech (000998) or beat market expectations (denghai seeds (002041) .,2) new policies are further expected in december and 1q2013.,3) capital market has fully expected the oversupply situation of the sector.,leading companies continue to be the focus of attention. denghai seeds (002041) (high flexibility) and longping hi-tech(000998) (stable performance) are key recommendations.,please read the disclaimers following this report.,5,2. seeds by 2015, corn seed market capacity will reach up to rmb25.3bn with a cagr of 13%.,2010,2011,2012,2013,2014,2015,cagr,pessimistic estimate,planting area (100mn mu) hybridization rate price of seeds sowed per mu (rmb/mu) market capacity (rmb100mn),4.71 96.6% 30.50 138.77,4.79 97.1% 32.03 149.04,4.88 97.6% 33.63 160.08,4.97 98.1% 35.31 171.93,5.05 98.5% 37.07 184.66,5.14 99.0% 38.93 198.33,1.78% 0.50% 5.00% 7.40%,neutral estimate,planting area (100mn mu) hybridization rate price of seeds sowed per mu (rmb/mu) market capacity (rmb100mn),4.71 96.6% 30.50 138.77,4.79 97.7% 33.55 157.21,4.88 98.9% 36.91 178.11,4.97 100.0% 40.60 201.60,5.05 100.0% 44.66 225.71,5.14 100.0% 49.12 252.69,1.78% 1.19% 10.00% 12.74%,optimistic estimate,planting area (100mn mu) hybridization rate price of seeds sowed per mu (rmb/mu) market capacity (rmb100mn),4.71 96.6% 30.50 138.77,4.79 98.0% 35.08 164.86,4.88 99.5% 40.34 195.86,4.97 100.0% 46.39 230.36,5.05 100.0% 53.34 269.63,5.14 100.0% 61.35 315.59,1.78% 1.50% 15.00% 17.86%,please read the disclaimers following this report.,6,2. seeds by 2015, rice seed market capacity will reach up to rmb22.2bn with a cagr of 15%.,2010,2011,2012,2013,2014,2015,cagr,area (100mn mu),4.47,4.51,4.55,4.59,4.63,4.67,0.86%,pessimistic estimate,popularity rate,of,52.00%,52.26%,52.52%,52.78%,53.05%,53.31%,0.50%,hybridization,total (rmb100mn),111.77,123.57,136.64,151.1,167.12,184.86,10.59%,neutral estimate,popularity rate,of,52.00%,52.57%,53.14%,53.72%,54.30%,54.90%,1.09%,hybridization,total (rmb100mn),111.77,128.14,146.96,168.6,193.51,222.18,14.73%,optimistic estimate,popularity rate,of,52.00%,53.56%,55.17%,56.82%,58.53%,60.28%,3.00%,hybridization,total (rmb100mn),111.77,133.91,160.43,192.19,230.2,275.66,19.79%,sources: wind, haitong securities research institute please read the disclaimers following this report.,7,3. then breeding,the poultry & livestock breeding sector is expected to see a stronger rise in 2h2012. but the specific timing is still uncertain.,1) pork price has been dropping for 1.5 years. from a cyclical perspective, pork price may see a stronger rebound in 2013;,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 hogs on hand will decrease rapidly, pork price will rebound and 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 price: 1) loss of the entire sector; 2) a trend of decreasing quantities of sows and 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.,8,3. then breeding a breeding cycle lasts 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 please read the disclaimers following this report.,9,3. then breeding comparison between chuying agro-pastoral (002477) and muyuan food,slaughtering rate,chuying agro-pastoral 1.02mn hogs for 2011 1.60mn hogs expected for 2012,muyuan food 0.61mn hogs for 2011 1.00mn hogs expected for 2012,mode of expansion level of breeding sales revenues profits pe,companies + farmers large-scale pig farms rmb1.3bn rmb429mn 21x,industrialized breeding is realized with a higher degree of automation higher than agro-pastoral rmb1.134bn rmb3.57mn ?,sources: wind, haitong securities research institute please read the disclaimers following this report.,10,4. opportunities will emerge 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 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. the yoy price performance will become pleasing as well. therefore, from a perspective of prices, opportunities will emerge in the aquaculture sector during the spring fishing season. we suggest that attention is paid to zhangzidao (002069) , whose share price has dropped greatly as a result of unfavorable news this year and homey (600467) with stronger performance flexibility.,please read the disclaimers following this report.,11,5. stock selection: 4 ideas,there are 4 ideas for stock selection:,1) present1q2013: seed sector. the sector has 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) ;,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 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- tradable shares.,4) 3q2013: feed sector. changes of earnings of the feed sector lag behind the breeding sector by 3 to 6 months. dabeinong (002385).,please read the disclaimers following this report.,12,6. 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 performance 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. 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 optimistic expectations;,b) advances from customers are very good;,c) 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.,please read the disclaimers following this report.,13,6. key recommendation: denghai seeds (002041),2) continued heavy volume of denghai 605 at a fast rate is the biggest guarantee for its continuously boosted performance:,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 performance 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 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 in 0.80mn-1.00mn mu areas.,4) subsidiaries of the company are expected to generate better-than-expected performances: all subsidiaries have achieved rapid growth in 2012 except denghai pioneer whose earnings have declined. denghai liangyu deserves particular attention. 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.,14,6. key recommendation: denghai seeds (002041),earnings forecast: 2012-2014 eps, rmb0.73, rmbb0.95 and rmb1.19,respectively.,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.,please read the disclaimers following this report.,15,analysts statement,research team of agriculture sector:,chief analyst of agriculture, forestry, animal husbandry and fishery sector: ding pin,sac certificate no.: s0850511050001 telephone:email: ,contact person: xia mu, cfa, frm sac certificate no.: s0850512090002 telephone:email: ,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 person 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 company be held responsible for any loss caused 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 fluctuate. 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 only used a reference for the companys designated clients, who shall not base their investment decisions solely on this report. we do not take into account specific investment objective, financial conditions or ne