类别:公司 机构:中国国际金融股份有限公司 研究员:Yaping XIAO/Di WU/Xiaofeng QIU 日期:2022-06-17

Investment positives

    We initiate coverage on ADAMA Ltd with an OUTPERFORM rating and a target price of Rmb14.15, implying 1.5x 2022e P/B and 27.2x 2022e P/E.

    Why an OUTPERFORM rating?

    ADAMA is the world’s largest supplier of non-patented crop protection products. It is an important member of Syngenta Group, which is the world’s largest crop protection company. The company cooperates with Syngenta Crop Protection AG and they enjoy synergy in product hierarchy, synthesis of active ingredients (AI) for pesticides, preparation production, distribution channels, product portfolios, and supply chain. We believe this will give ADAMA unique competitive edges, help the company expand its coverage of the global crop protection market, and boost its sales and earnings.

    Global prices of agricultural products and crude oil both remain high, bolstering pesticide demand. ADAMA’s pesticide preparation prices increased 14% in 4Q21 and 18% in 1Q22 YoY. As global crude oil and grain prices remain high, we think the global crop protection industry will stay in an up-cycle in 2022. In our view, global pesticide preparation prices could remain elevated and ADAMA’s earnings could turn around.

    ADAMA’s business lines cover the full value chain of non-patented pesticides. The firm has built worldwide distribution channels, and continues exploring emerging markets. It possesses ample registration-certificate resources across the world. ADAMA provides diversified and differentiated products. It has built a global supply chain system that focuses on China but also has global coverage. These efforts give ADAMA an important advantage in non-patented pesticides and make the company highly competitive in the global market.

    How do we differ from the market? The market believes the industry for non-patented pesticides has low barriers to entry, thus posing challenges for existing firms to gain competitive advantages. However, we do not think the market recognizes ADAMA’s differentiated capabilities in preparation compound formulation and high thresholds for its global distribution channels. We believe these capabilities enable ADAMA to gain strong technological advantages and effectively address the requirements of farmers. The company has built local distribution channels across the world, boosting its market share.

    Potential catalysts: Elevated global grain prices; up-cycle of the global agrochemical industry; rising prices of pesticide preparations.

    Financials and valuation

    We expect the firm’s 2022 and 2023 EPS to be Rmb0.52 and Rmb0.66. The stock is trading at 1.2x 2022e P/B, 1.2x 2023e P/B, 22.3x 2022e P/E, and 17.7x 2023e P/E. Initiate with an OUTPERFORM rating and a target price of Rmb14.15, offering 21.1% upside and implying 1.5x 2022e P/B, 1.4x 2023e P/B, 27.2x 2022e P/E and 21.4x 2023e P/E.


    Sharp volatility of exchange rates; derivatives risk; goodwill impairment; volatile prices of pesticide AI; disappointing recovery in global agrochemical industry; safety and environmental protection issues.