􀀗 Fertiliser is vital for feeding a growing
population as farm land shrinks
􀀗 Improving farmers’ P&L, pricing reform,
and a stimulus package are set to boost
sector earnings in 2009
􀀗 We initiate on China BlueChemical (3983)
and Sinofert (297) with Overweight (V)
China fertiliser demand remains robust
With only 7% of the world’s arable land, China is responsible
for feeding 22% of the global population. We believe
fertiliser demand in China is resistant to the economic
slowdown and will remain robust in 2009 and beyond, driven
by the need to feed a growing, wealthier population. Our
analysis of rural P&Ls also indicates that, as farmers become
richer, they will spend more money on fertiliser, which, in
turn, is the key to improving crop yields.
Multiple catalysts to boost sector earnings
􀀗 To narrow the income gap with city dwellers, we expect
further increases in subsidies to farmers and the price the
government pays for grain.
􀀗 We think the recent price reforms are long-term positive
for fertiliser producers.
􀀗 The soon-to-be-announced petrochemical industry
stimulus package should help ease the oversupply of
nitrogen and phosphate fertilisers.
We initiate coverage of China BlueChemical, our top sector
pick, with an OW(V) and a target price of HKD5.65 and
Sinofert with an OW(V) and a target price of HKD5.30.
Our 2009 earnings estimates are 4% and 8% higher than
consensus for China BlueChemical and Sinofert, respectively.
We have done an analysis on earnings sensitivity and found that
fertiliser prices have the greatest impact on 2009e earnings.
Risks: Potential supply interruptions; any unfavourable
changes in government pricing policy.

目录

Investment thesis 7
Sector outlook 7
China BlueChemical 8
Sinofert 9
Valuation and sensitivity
analysis 11
Valuation methodology 11
Key risks to our earnings estimates 12
Historical PE and PB 14
Financials & valuation: China BlueChemical 18
Financials & valuation: Sinofert Holding 19
China fertiliser industry 20
Market overview 20
Sharp demand growth 20
Feeding 1.3bn people remains a challenge 22
China nitrogen market 27
Market overview 27
Urea is dominant 28
Gas-based more competitive than coal-based producers 30
China phosphate market 32
Market overview 32
Robust domestic demand 32
Net exporter 33
Rich phosphate ore reserve 33
But a need to import sulphur 34
Improving outlook 34
China potash market 35
Market overview 35
Robust domestic demand 36
Largest importer 36
Domestic market 37
Compound fertiliser 38
Market overview 38
Fast-growing domestic demand 38
Low barriers to entry 39
Methanol market outlook 40
Market overview 40
China to drive global demand 40
Oversupply 41
China BlueChemical 42
Investment positives 42
Company profile 42
Key risks 47
Sinofert Holdings 48
Investment positives 48
Company profile 48
Key risks 52
Key Data points – Urea 53
Key data points – Phosphate 54
Key data points – Potash 55
Appendix 56
Appendix 1: Glossary of fertiliser terms 56
Appendix 2: How are fertilisers produced? 58
Appendix 3: Seasonality chart 62
Disclosure appendix 64
Disclaimer 67