麦格理中国农业行业中国农业猪年丰收之年201921259页

Pleaserefertopage57forimportantdisclosuresandanalystcertification,oronourwebsite:mildgrowthofcornprices,uncertainsoymealprices21Appendices–terminologyofhogindustry24WHGroup/Shuanghui–PreferWHtoShuanghui25YumChinaHoldings28MacVisit:FujianSunner32MacVisit:WensFoodstuff37MacVisit:MuyuanFoodstuff41MacVisit:NewHopeLiuhe45MacVisit:COFCOMeat48MacVisit:GuangdongHaid53AnalystsMacquarieCapitalLimitedLindaHuang,[e-mail][e-mail][e-mail][e-mail][e-mail]tryAfruitfulpigyearKeypointsHogpricespoisedtorallyin2H19;ASFwillintensifythishogcycle.Broilerpricestoremainhighduetoshortsupply.Feedoutlook:mildgrowthofcornprices,uncertainsoybeanmealprices.Wevisitedsixlistedcompaniesinthefieldofagriculturerecentlyandthusprovideour2019outlookforChina’sagricultureindustry.BasedonMacquarie’ssupply&demandmodel,webelievehogpricesarewellpoisedforarallyin2H19andthatbroilerpriceswillremainhigh,duetotightsupply.Onthebackoflittlepressurefromfeedcosts,webelieve2019willbeafruitfulYearofthePigforhogandbroilerproducersinChina.Hogpricepoisedtorallyin2H19;ASFwillintensifythishogcycleTheNationalBureauofStatisticsannouncedareported8.3%YoYdecreaseinsowstockattheendof2018.Ourindustrycheckswithfeedproducersnationwideindicatedamoreseveredeclineat~10%YoY.InadditiontotheongoingAfricaSwineFever(ASF)preventingrestocking,weestimatean8.1%decreaseintotalsupplyand3.6m-tonshortageifassumed2%demanddecline.Basedonoursensitivityanalysis,each1%growthonthedemandsidewillleadtoa0.55m-tonporksupplyshortage.Webelieveporkpriceswillbottomin2Q19,thenpickupin2H19.Moreover,wethinktheongoingASFwilllastforalongtime,whichwillintensifyandprolongthishogcycle.BroilerpriceremainshighduetosupplyshortageChina’swhite-featheredboilerproductionreliesmainlyonimportedgrandparents.Giventhelingeringshortageofimportedgrandparentstock,Macquariebroilersupplyanddemandmodelprojectsa3%increaseofsupplyin2019.Onthedemandside,webelieveconsumptionwillalsopickupslightly,with3%YoYgrowthin2019duetoconcernsonASFandthesubstitutioneffectofporkashogpricespickupin2H19.Therefore,webelievebroilerpriceswillremainhighin2019,withresultinggrossmarginpressureforthedownstreamcompanies,suchasShuanghuiandYUMC.Feedpricesoutlook:mildgrowthofcorn,uncertainsoymealFeedcostscomprise60-70%ofhogproductionCOGSand60-65%ofbroilerproductionCOGS.Cornandsoybeanmealarethetwokeyrawmaterialsforbothhogandbroilerfeed.In2019,webelievethecornpricewillseemildgrowth,drivenbysupplyshortage.Postadramatic2018,soymealprices,whilestilluncertainduetothetradewar,areunlikelytofurtherrisein2019dueto4.4%growthinBrazil’sexports,whichmadeup75%ofChina’s2018soybeanimports,basedonUSDA’slatestprojection.Overall,weseelimitedfeedcostpressure.RecommendationsInupstream,hogandbroilerproducersshouldbenefitfrompricehikesandlimitedpressurefromfeedcostsin2019.Hogcycleislongerthanbroilercycle.Asfordownstream,wepreferWHGroup(288HK,HK$6.79,Outperform,TP:HK$8.90)toShuanghui(000895CH,Rmb25.11,Neutral,TP:Rmb22.40),giventhatwebelievetheUSfreshporkbusinessisontracktorecovery,whileChinabusinesswillbeundermarginpressurefromhighbroilerandhogprices.WemaintainourNeutralonYUMC(US$41.66,TP:US$34.50)duetocommoditypricepressureandmarketcompetition.MacquarieResearchChinaagricultureindustry12February20192HK/ChinaconsumervaluationtableFig1HK/Chinaconsumervaluationtable(1)CompanyCodePriceRatingTPUpsideMktCapP/E(X)P/B(X)ROE(%)EPSGrowth(%)PEGDivyield(%)FCFyield(%)(lcy/sh)(lcy/sh)(%)US$m2018E2019E2018E2019E2018E2019E2018E2019E2019E2018E2019E2018E2019EDepartmentstoresGoldenEagle3308HK8.25OP11.7042%1,78810.79.81.81.717.717.8-13.28.81.14.44.75.40.4Lifestyle1212HK11.50OP17.5052%2,2419.88.93.93.242.539.338.811.00.85.15.19.78.1LuxurySamsonite1910HK22.80UP18.40-19%4,23120.218.02.32.215.413.55.7-8.3-2.21.92.1-1.11.8Prada1913HK24.95OP43.0072%8,49920.518.22.32.211.612.139.112.71.43.13.54.43.7ChowTaiFook1929HK6.85Neutral5.70-17%8,61916.715.62.02.012.612.936.37.32.18.24.7-2.84.0LukFook590HK22.45UP18.80-16%1,6629.69.01.31.214.514.034.87.01.33.84.62.80.3ChowSangSang116HK11.42OP22.7099%9886.96.00.70.710.611.246.714.30.45.86.515.415.4LaoFengXiang600612CH42.70OP62.0045%2,73015.213.23.32.823.022.913.815.20.92.42.9-15.730.2SportswearAntaSports2020HK40.90OP42.003%13,76222.819.06.15.428.330.133.320.01.03.34.03.54.1LiNing2331HK9.78Neutral9.20-6%2,75929.122.43.53.012.714.533.930.10.70.00.01.84.2CosmeticsSaSa178HK2.94Neutral2.80-5%1,13320.117.93.63.718.720.330.812.31.56.26.46.82.0L'Occitane973HK13.94Neutral13.70-2%2,65523.521.52.42.310.410.9-26.99.22.31.92.04.54.9ShanghaiJahwa600315CH27.87UP20.20-28%2,82943.145.43.23.07.86.933.2-5.2-8.81.41.51.3-2.4HomeapplianceretailersGOME493HK0.65UP0.40-38%1,842NA