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1、360 320 280 240 200 3m 3/12 deutsche bank markets research rating buy europe switzerland company syngenta date 30 september 2012 company update chemicals specialty chemicals reuters synn.vx bloomberg synn vx exchange ticker vtx synn price at 28 sep 2012 (chf) price target (chf) 52-week range (chf) 3

2、51.50 400.00 351.50 - 230.00 crop update highlights strong high tech growth opportunities: buy crop update highlights strong high tech growth opportunities: buy syngentas crop update in india, focusing on two key crops rice gaining momentum (icm offer: almeria, spain) area ha 1022120 206 250 125 num

3、ber of 10 growers 25 source: syngentasource: syngenta 2009201020112012 integrated crop management: integrated crop management (icm) is an approach to provide integrated solutions for sustainable pest and disease management. over recent decades the focus on crop production has moved from yields to qu

4、ality and safety and more recently sustainability has been at the top of the agenda for many big retailers and food companies. as highlighted in figure 6 the integrated vegetable is gaining momentum with increase in number of growers and area cultivated using this icm approach. with the continuous f

5、ood safety concerns and increased food chain pressures on growers we believe this integrated approach will be key growth driver for syngenta in the medium term. value added products: syngenta has industry leading marker platform for food chain traits. the company has already indentified a significan

6、t number of genes responsible for several food chain traits (e.g. sugar content, organic acid content, amino acid content, volatile metabolites, fruit texture and color) across a number of vegetables including tomato, lettuce, brassica, cucumber, melon, watermelon and pepper. this enables the compan

7、y to develop innovative pipeline for retail and consumer needs. some of the solutions offered include tomato with superior flavour, benchmark shelf life and yield and water melon with high sugar content and long shelf life. page 8deutsche bank ag/london 30 september 2012 specialty chemicals syngenta

8、 figure 7: syngenta has industry leading marker platform for food chain traits figure 8: seed/crop protection spend area mha 15 10 5 0 seeds/crop protection spend $/ha 1500 1000 500 0 chinaindiaaseannortheurope america source: syngentasource: deutsche bank smallholder intensification: emerging marke

9、ts currently practise large surface, low intensity cultivation for producing vegetables. this requires large areas for cultivation and results in low yields due to significant lower spending on seeds/crop protection products per hectare. the company sees significant growth potential from intensifica

10、tion of vegetable production in these regions. the company expects $200m sales by 2020 from vegetables seeds and crop protection sales in india from 100m sales in 2011 figure 9: india tomato: intensification driving grower profit, market value open pollinated1st generation hybridbest practice hybrid

11、protected hybrid current practice % ha cost of cultivation $/ha yield, ton/ha income, $/ha grower profit, $/ha 40% 300 12 650 350 60% 1,800 45 3800 2000 3,000 100 10000 7000 source: deutsche bank, company data figure 10: syngentas value creation solution for vegetables source: syngenta deutsche bank

12、 ag/londonpage 9 30 september 2012 specialty chemicals syngenta point 6: short-term outlook some impact from us drought on q3 sales this crop update also gave us the opportunity to discuss the more short-term outlook with management. we note the following points: update on q3: post the severe drough

13、t in the us, management expects higher than usual end of season returns and excess channel inventory of fungicide in the region. added to a very tough base effect in herbicides in q3 (q3 2011 benefited from early buying), we do not expect us to grow in q3. however at this stage we only anticipate a

14、volume impact from this drought. whilst management cannot completely rule out price cuts happening again (as happened in 2010) it believes it is unlikely for two main reasons: i) the companies which initiated the price cuts in 2010 did not benefit from these actions in the end as the competition fol

15、lowed straight away ii) the current context for soft commodities and agriculture is more favourable than in 2010 implying that distributors are likely to keep some inventory and carry it over to the next season which is expected to be strong (products shelf life allows to stock for a couple of years

16、 at least). despite this negative drought effect, we still expect q3 to show growth for syngenta driven by latam (although q3 is usually still a relatively small quarter for the region and the latam upside should be seen in q4) and asia which is starting to pick-up. overall we forecast c5% local cur

17、rency sales growth in q3 driven by pricing (+3%) and modest growth in volumes (+2%). management is not seeing an overall negative impact from the integrated strategy. management does not believe there has been a net negative impact from the integrated strategy at the top line level overall and belie

18、ves it has maintained its overall market share positions. in many countries/regions it is actually beginning to see some benefits which should become more significant from the next season as sales persons have now experienced at least one season of integrated approach and are more confident to recom

19、mend integrated programmes for the next season. point 7: azoxystrobin patent expiry not seen as a big threat in china the patent of syngentas largest product, fungicide azoxystrobin (c10% of group sales) started to expire in 2011. we have written extensively about syngentas strategy to manage this p

20、atent expiry, the doubling of its capacity in order to pre-empt generic competition. following the patent expiry in china in 2011, there have been around 30 applications for new registrations of generic versions of azoxystrobin (amistar) in china. this crop update was also an opportunity to discuss

21、this issue with local management dealing with china, which does not see is as a threat for the following reasons: in china, the penetration of strobilurin (a class of fungicides which includes azoxystrobin), is only 5% of the total chinese market. syngenta therefore sees the potential for increased

22、penetration as a strong growth opportunity, with market share not a primary issue. in order to boost the penetration of strobilurins in china, the company is reviewing its crop proposition and pricing strategy. azoxystrobin in china has been primarily focused on high value vegetable crops and is now

23、 being repositioned to field crops where there is a very significant potential. companies who have submitted registration do not necessarily have the capacity and ability to produce azoxystrobin at the right cost of good sold (due to the lack of scale) and quality. in addition, azoxystrobin is relat

24、ively complex to produce as it has a significant number of production steps. regulations in asia are becoming tougher. for example in india, it takes 3-5 years for a product to be registered which could act as barrier for new generics page 10deutsche bank ag/london 30 september 2012 specialty chemic

25、als syngenta introductions even after the patent expiry. the chinese government is also toughening regulations in agrochemicals, notably to prevent pollution and focus on more efficient, higher value agchems, which should see significant consolidation of the crop protection competitive landscape as

26、a result. with its integrated approach, syngenta is already trying to change its strategy and to move away from selling just azoxystrobin to selling azoxystrobin as part of the offer which is not possible to copy for generic players. point 8: confidence on a further step-up in licensing income reinf

27、orced discussions with davor pisk, coo and responsible for the us region (and previously head of seeds under the old structure) further reinforced our confidence in a further step-up of licensing income for syngenta. we note following key points from these discussion: on the possibility for syngenta

28、 to announce additional licensing deals, management stressed that the key issue is not others appetite for syngentas traits (which appears to be very strong) but agreeing on a price for the traits as syngenta wants to maximise their value, alongside the time it takes to breed the seeds. as for the p

29、ossibility for other seed companies to switch from one technology to the other (e.g. pioneer currently licensing in monsantos corn rr trait but potentially looking at syngentas ga21 glyphosate resistant trait), management believes switching costs from one trait to another do not appear to be a prima

30、ry issue. the issue centres more around breeding times. we remain convinced that further licensing deals are very likely as syngenta is best positioned in gm traits for corn due to their efficacy vs. other traits (e.g. its existing crw trait/mir 604 vs. monsantos rw or dows herculex) or unique natur

31、e (e.g. viptera). management appears very confident on the potential for duracade (second generation of crw trait syngenta is currently working on) due to significantly better efficacy (higher expression of protein) and a different mode of action which will enable syngenta to offer a dual mode of ac

32、tion against the crw, without the need to use dows herculex rw which has been causing yield drag issues when stacked in some competitors multi-stack combinations. viptera royalties should start ramping up as pioneer is expected to introduce viptera in its seed offer from the upcoming season in the u

33、s (advanced bookings from q4 2012) and from next year in brazil. on mir604, management confirmed that as a result of reaching certain regulatory milestones in h1, the company had booked the npv of the minimum revenue stream expected from this deal which had initially been estimated as at least $400m

34、 implying approximately $150m+ potentially left to be booked. cropnosis estimates existing and new licensing deals on viptera, mir 604, ga 21 (roundup ready trait) and the new crw trait (duracade, to be launched for the 2014 growing season) should generate profits for the group of $538m in 2013 and

35、$843m in 2016 (from c$400m in 12e). although we view these forecasts as upside scenarios (our royalties forecasts are c50% below) this highlights nonetheless the significant optionality in syngentas seeds business (note we are still 7% above 13e consensus). valuation we use a dcf to derive our price

36、 target as it best accounts for the groups substantial cash flow potential. our key assumptions of wacc 8.4% (beta of 1, rfr of 4%, and erp of 4.5%) and tgr of 3% are in line with long-term sector growth. our cost of capital is in line with the sector given the companys sector-average risk profile.

37、deutsche bank ag/londonpage 11 30 september 2012 specialty chemicals syngenta risk risks include i) adverse weather conditions in a number of regions across the globe, which would impact farmers agrochemical spending; ii) delayed product launches; iii) substantially declining crop prices, which woul

38、d impact farmers agrochemical spending; iv) persistent aggressive competitive behaviour on pricing from some peers; v) adverse fx moves (particularly a strong chf). page 12deutsche bank ag/london 6. 6. 30 september 2012 specialty chemicals syngenta appendix 1 important disclosures additional informa

39、tion available upon request disclosure checklist company syngenta ticker synn.vx recent price* 351.50 (chf) 28 sep 12 disclosure 6,14,17 *prices are sourced from local exchanges via reuters, bloomberg and other vendors. data is sourced from deutsche bank and subject companies important disclosures r

40、equired by u.s. regulators disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the united states. see important disclosures required by non-us regulators and explanatory notes. deutsche bank and/or its affiliate(s) owns one percent or more of any clas

41、s of common equity securities of this company calculated under computational methods required by us law. 14. deutsche bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. important disclosures required by non-u.s. regulators pl

42、ease also refer to disclosures in the important disclosures required by us regulators and the explanatory notes. deutsche bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by us law. 17. deut

43、sche bank and or/its affiliate(s) has a significant non-equity financial interest (this can include bonds, convertible bonds, credit derivatives and traded loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m euros. for disclosures pertaining to re

44、commendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http:/ analyst certification the views expressed in this report accurately reflect the pe

45、rsonal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. in addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. virginie boucher-ferte deutsche bank a

46、g/londonpage 13 securityprice 1.5. 2.6. 3.7. 4.8. 0 30 september 2012 specialty chemicals syngenta historical recommendations and target price: syngenta (synn.vx) (as of 9/28/2012) 400.00 previous recommendations 350.00 300.00 250.00 1 2 3 4 5 6 7 8 strong buy buy market perform underperform not rat

47、ed suspended rating 200.00 150.00 100.00 50.00 current recommendations buy hold sell not rated suspended rating *new recommendation structure as of september 9,2002 0.00 oct 09jan 10apr 10jul 10oct 10jan 11apr 11jul 11oct 11jan 12apr 12jul 12 date 22/07/2010: 14/10/2010: 09/12/2010: 09/02/2011: buy,

48、 target price change chf300.00 buy, target price change chf310.00 buy, target price change chf335.00 buy, target price change chf380.00 19/08/2011: 07/05/2012: 26/07/2012: 23/08/2012: buy, target price change chf330.00 buy, target price change chf365.00 buy, target price change chf380.00 buy, target

49、 price change chf400.00 equity rating key buy: based on a current 12- month view of total equity rating dispersion and banking relationships share-holder return (tsr = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that i

50、nvestors buy the stock. sell: based on a current 12-month view of total share- holder return, we recommend that investors sell the stock hold: we take a neutral view on the stock 12-months 400 350 300 250 200 150 100 50 43 % 37 % 52 % 29 % 6 %42 % out and, based on this time horizon, do not recommen

51、d either a buy or sell. notes: buyholdsell 1. newly issued research recommendations and target prices always supersede previously published companiescoveredcos. w/ bankingrelationship research. 2. ratings definitions prior to 27 january, 2007 were: buy: expected total return (including dividends) of

52、 10% or more over a 12-month period european universe hold:expectedtotalreturn(including dividends) between -10% and 10% over a 12- month period sell: expected total return (including dividends) of -10% or worse over a 12-month period page 14deutsche bank ag/london 30 september 2012 specialty chemic

53、als syngenta regulatory disclosures 1. important additional conflict disclosures aside from within this report, important conflict disclosures can also be found at https:/ under the disclosures lookup and legal tabs. investors are strongly encouraged to review this information before investing. 2. s

54、hort-term trade ideas deutsche bank equity research analysts sometimes have shorter-term trade ideas (known as solar ideas) that are consistent or inconsistent with deutsche banks existing longer term ratings. these trade ideas can be found at the solar link at http:/. 3. country-specific disclosure

55、s australia and new zealand: this research, and any access to it, is intended only for wholesale clients within the meaning of the australian corporations act and new zealand financial advisors act respectively. brazil: the views expressed above accurately reflect personal views of the authors about

56、 the subject company(ies) and its(their) securities, including in relation to deutsche bank. the compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of deutsche bank. in cases where at least one brazil based analyst

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60、onsumption tax by multiplying the transaction amount by the commission rate agreed with each customer. stock transactions can lead to losses as a result of share price fluctuations and other factors. transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuat