Investment thesis 6
Structural issues to overcome 6
Mega trends to emerge 6
Mega-players will benefit 7
China BlueChemical (3983.HK, OW-V, TP HKD6.5) 7
Sinofert (0297.HK, OW-V, TP HKD6) 8
Historical PE and PB 11
Company profiles 13
China BlueChemical (3983) 14
Sinofert Holdings (0297) 21
Industry analysis 26
China fertiliser industry 27
China nitrogen market 33
China phosphate market 40
China potash market 44
Appendix 50
Appendix 1: Glossary of fertiliser terms 50
Appendix 2: How are fertilisers produced? 52
Appendix 3: Seasonality chart 55
Disclosure appendix 57
Disclaimer 60

Removal of subsidies and government
intervention to resolve structural issues
􀀗 Invest in the companies that can take
advantage of the mega trends
􀀗 Top picks: China BlueChemical (OW-V)
and Sinofert (upgrade to OW-V)
The government’s efforts to encourage consolidation have
been largely ineffective. In 2010, it will take active steps to
force out smaller players and solve the structural issues of gas
supply shortage and poor profitability due to overcapacity.
Gradual removal of the gas subsidy will raise costs for fertiliser
producers. Other subsidies, such as electricity and transport,
will gradually be removed. We assume government will raise
the price of gas for fertiliser producers by 25% in 1H10.
Improving farmers’ incomes is a government priority in
2010 and is likely to come in the form of higher grain buyout
prices, fuelling demand for fertiliser. We forecast domestic
urea prices to rise 8% and potash demand to grow 43%, with
distributor margins recovering to 9.5% in 2010.
These trends will cause mega-players with feedstock
advantage to emerge in China. We forecast a rebound in
profitability in 2011 with net income forecasts for the two
key players, BlueChem and Sinofert, 30% above consensus.
China BlueChemical, our top pick, will remain the lowest
cost urea producer in China as competitors suffer 25% gas
cost rises. Methanol capacity expansion will drive earnings
as methanol pricing rises 21% in 2010. Debt-free and cash
rich, it has the resources to make useful acquisitions.
Sinofert, China’s leading fertiliser distributor, should see
34% growth in potash sales in 2010, as demand recovers
from a depressed 2009. Dilution from share placement is in
the price. Higher potash sales and price are the key catalyst
本文来自: 人大经济论坛 行业分析 版，详细出处参考：http://www.pinggu.org/bbs/viewthread.php?tid=747722&page=1&fromuid=56085