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1、Research Report,2013 Agricultural Sector InvestmentStrategy:First Seed,then Breeding,DING Pin(Chief Analyst),SAC Certificate No.:S0850511050001,XIA Mu(Analyst),SAC Certificate No.:S0850512090002,Haitong SecuritiesDecember 12,2012,1.,2.,3.,3,4.,5.,6.,2,Summary,Review of the Performance of Agricultura
2、l 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 Re
3、commendation 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,
4、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,
5、Applianc,Pharmac,ceutical,医药生,Biotechn物,nology,RealEst产,tate,房地,3,1.Review of the Performance of AgriculturalStocks in 2012,As of December 11,2012,agricultural stocks underperformed the A-share market by 6.83%(-10.79%vs.-3.96%).,1510,50-5-10-15-20-25,Sources:Wind,Haitong Securities Research Institut
6、e,Please read the disclaimers following this report.,4,2.Seeds,So far,the seed stocks are actively traded.We believe such an activity willcontinue till 1H2013:,1)In 2012,leading companies have either maintained high performance growth(Longping Hi-tech(000998)or beat market expectations(Denghai Seeds
7、(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)arekey reco
8、mmendations.,Please read the disclaimers following this report.,5,2.SeedsBy 2015,corn seed market capacity will reach up to RMB25.3bn with a CAGR of13%.,2010,2011,2012,2013,2014,2015,CAGR,Pessimistic Estimate,Planting Area(100mn Mu)Hybridization RatePrice of Seeds Sowed Per mu(RMB/Mu)Market Capacity
9、(RMB100mn),4.7196.6%30.50138.77,4.7997.1%32.03149.04,4.8897.6%33.63160.08,4.9798.1%35.31171.93,5.0598.5%37.07184.66,5.1499.0%38.93198.33,1.78%0.50%5.00%7.40%,Neutral Estimate,Planting Area(100mn Mu)Hybridization RatePrice of Seeds Sowed Per mu(RMB/Mu)Market Capacity(RMB100mn),4.7196.6%30.50138.77,4.
10、7997.7%33.55157.21,4.8898.9%36.91178.11,4.97100.0%40.60201.60,5.05100.0%44.66225.71,5.14100.0%49.12252.69,1.78%1.19%10.00%12.74%,Optimistic Estimate,Planting Area(100mn Mu)Hybridization RatePrice of Seeds Sowed Per mu(RMB/Mu)Market Capacity(RMB100mn),4.7196.6%30.50138.77,4.7998.0%35.08164.86,4.8899.
11、5%40.34195.86,4.97100.0%46.39230.36,5.05100.0%53.34269.63,5.14100.0%61.35315.59,1.78%1.50%15.00%17.86%,Please read the disclaimers following this report.,6,2.SeedsBy 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
12、.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(
13、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 InstitutePlease read the disclaimers
14、 following this report.,7,3.Then Breeding,The poultry&livestock breeding sector is expected to see a stronger rise in2H2012.But the specific timing is still uncertain.,1)Pork price has been dropping for 1.5 years.From a cyclical perspective,pork price may seea stronger rebound in 2013;,2)Lets look a
15、t the situation abroad.Soaring feedstuff prices saw biggest loss in 14 years sothat 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 andprices of imported pork may go up in 2013;,3
16、)The specific time point remains to be seen.Leading indicators of practical rebound of porkprice:1)Loss of the entire sector;2)a trend of decreasing quantities of sows and live hogson hand;3)proportion of sows/live hogs preferably below 10%.By then,we suggest focusingon Chuying Agro-Pastoral(002477)
17、and Muyuan Food which is about to be listed(time to bedetermined).,Please read the disclaimers following this report.,8,3.Then BreedingA 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 Secu
18、rities Research InstitutePlease read the disclaimers following this report.,9,3.Then BreedingComparison between Chuying Agro-pastoral(002477)and Muyuan Food,Slaughtering Rate,Chuying Agro-pastoral1.02mn hogs for 20111.60mn hogs expected for 2012,Muyuan Food0.61mn hogs for 20111.00mn hogs expected fo
19、r 2012,Mode ofExpansionLevel of BreedingSales RevenuesProfitsPE,Companies+farmersLarge-scale pig farmsRMB1.3bnRMB429mn21x,Industrialized breeding is realized with ahigher degree of automationHigher than Agro-pastoralRMB1.134bnRMB3.57mn?,Sources:Wind,Haitong Securities Research InstitutePlease read t
20、he disclaimers following this report.,10,4.Opportunities will Emerge in AquacultureSector 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 alow level
21、during the spring fishing season,and even a lot of south sea cucumberculturists have suffered great losses.We believe that under the constraints of cobwebeffect,In 2013 the quantity of south sea cucumbers cultured will decrease and theimpacts on prices will be reduced to a certain extent during the
22、spring fishing season.The YoY price performance will become pleasing as well.Therefore,from a perspectiveof prices,opportunities will emerge in the aquaculture sector during the spring fishingseason.We suggest that attention is paid to Zhangzidao(002069),whose share price hasdropped greatly as a res
23、ult of unfavorable news this year and Homey(600467)withstronger 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.D
24、enghai Seeds(002041)is expected to generate performance beyond prior market expectations(weexpect its performance to grow over 10%in 2012 and over 50%in 1Q2013).Also,from a perspectiveof stability,we recommend Longping Hi-tech(000998);,2)April-May 2013:Aquaculture sector.Through observation of the p
25、rices during the spring fishingseason,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(0
26、00876)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 3to 6 months.Dabeinong(002385).,Please read the disclaimers
27、following this report.,12,6.Key Recommendation:Denghai Seeds,The Company is expected to achieve over 10%growth in its performance,exceeding marketexpectation.We are of the view that its performance for 1Q2013 is also worth expectation andwe judge that its performance will grow by over 60%at least:,1
28、)Accelerated growth in areas where 335 is promoted to be sowed in the new sales seasonwill be the direct push hand for enhanced and even better-than-expected performance.Wejudge that the sales will growth by over 15%YoY,mainly because:,a)Preliminary grassroots research results showed that most 335 d
29、istributors have hadoptimistic 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 re
30、ad 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 continuouslyboosted performance:,We estimate that the areas where Denghai 605 is promoted to be sowed in the past sales seas
31、on wasappropriate between 5.00mn and 5.50mn mu.Due to good field performance in 2012,we predicate thatthe areas where Denghai 605 will be promoted to be sowed in the new sales season will be between9.00mn and 10.00mn mu,up about 60%YoY.,3)Old varieties No.9 and No.11 of Denghai will contribute to th
32、e sales volume：,Such old varieties were sold in a small quantity in 2011 due to frost damage.While the seedproduction occurred normally in 2012,they will take a share in the sales volume in a new salesseason.At the same time,as Jingke 968,a new variety of seeds will be launched on the market in4Q201
33、2,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 havedeclined.Denghai Liangyu deserve
34、s particular attention.Due to excellent performances of Liangyu 88and 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,resp
35、ectively.,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 Agric
36、ulture Sector:,Chief Analyst of Agriculture,Forestry,Animal Husbandry andFishery Sector:DING Pin,SAC Certificate No.:S0850511050001Telephone:010-23219405Email:,Contact Person:XIA Mu,CFA,FRMSAC Certificate No.:S0850512090002Telephone:021-23219748Email:,Please read the disclaimers following this repor
37、t.,Disclaimers,This report is to be used solely by the clients of Haitong Securities Co Ltd(hereinafter referred to as the Company).The Companywill not deem any other person as its client notwithstanding his receipt of this report.Under no circumstances shall the informationcontained herein or the o
38、pinions expressed herein form an investment recommendation to anyone.Under no circumstances shall theCompany 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
39、 day this report isreleased.The prices,values and investment returns of the securities or investment instruments referred to herein may fluctuate.Atdifferent periods,the Company may release reports which are inconsistent with the materials,opinions and estimates contained herein.Investing in any ass
40、et class in the market bears risk;holding a cautious attitude is necessary.The materials,opinions,and estimatescontained herein is only used a reference for the Companys designated clients,who shall not base their investment decisions solely onthis report.We do not take into account specific investm
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42、d herein.We may also provide investmentbanking 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 thisreport shall be copied,photocopied,replicated or redistributed t
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