高盛-中国农业分析报告

News
The NDRC and Ministry of Finance made a joint announcement dated Jan
24 on policies to promote the fertilizer sector’s healthy development.
Analysis
Among the 6 points mentioned in the announcement, we believe the more
noteworthy ones are that: (1) the ex-factory prices of domestically produced
fertilizers as well as the imported fertilizers (except for potash) would be
based on market-adjusted prices instead of government guidance prices; (2)
the favorable policies including those in the prices of power, natural gas, and
railway transportation would be temporarily maintained and the relevant
departments and companies at all levels are urged to implement such
favorable policies; and (3) the amount of direct subsidies to farmers will only
be increased and not decreased. We would not take these measures as a
total surprise given that these are in-line with the broad measures published
after a recent executive meeting of the State Council (we have commented
on them on Dec 28). However, this joint announcement is still meaningful in
that it has specified an exact date (Jan 25, 09) for the switch to marketadjusted
prices from government guidance prices, which indicates that it’s
already in the stage of implementation instead of just discussions and
studies. We do not expect meaningful immediate earnings impact on
Sinofert and CBC because even before such announcements, the prices were
generally below the previous price caps, so their removals do not imply
immediate upside to prices now. That said, they would still likely bode well
for the Chinese fertilizer stocks in the medium-to-long term (more so in the
case of CBC given its direct leverage to prices and its long-term gas supply
pricing agreement with its own affiliate CNOOC that is not likely to be revised
even if the NDRC eventually raises the gas prices ) because they would at
some point be able to capture higher prices (above the previous price caps)
unless the Chinese government reverts to the old pricing practices later on.