www.research.hsbc.comDisclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it.Equities & EconomicsAgribusinessFebruary 2020By: Alexandre Falcao, Santhosh Seshadri, Andy Li, Shanella Rajanayagam and Augusto EnsikiGlobal AgribusinessUS-China trade deal playbookPhase I trade deal is about more than purchase targets; could potentially impact sectors, trade flows and economiesChina could buy about two-thirds of its promised target of US ag products in 2020, but coronavirus could be a wild cardUS farm products likely to be biggest beneficiaries of the deal; Brazil at a disadvantage 1 Equities & Economics ● Agribusiness February 2020 Executive summary 4 Trade deal is about more than purchase commitments 4 US ag products likely the biggest beneficiaries 4 China’s commitments unlikely to crowd out other trading partners 5 Can China honor its purchase commitments? 5 What are the possible ‘market conditions’ and their implications? 6 Implications on US crop and crop-input markets 6 Brazil agribusiness is at a disadvantage 7 Implications for China agribusiness 7 Agricultural trade in charts 8 US China trade deal 10 Impact on trade flows 10 Impact on grains market 13 Possible ‘market conditions’ and their implications on ag purchases 15 Impact on Brazilian exports and transportation 15 Impact on fertilizers 16 Impact on China’s agribusiness 17 Valuation and risks 18 Disclosure appendix 21 Disclaimer 24 Contents THIS CONTENT MAY NOT BE DISTRIBUTED TO MAINLAND CHINA Equities & Economics ● Agribusiness February 2020 2 Agricultural trade flow – China vs the world (USDbn) Source: UN Comtrade (2018 values) Soybeans (7.1)Fish & crustaceans (1.1)Grains (0.9)Fruits, Nuts (0.8)Meat (0.5)Animal fodder, Residue, wastes of food (0.5)Beverages, spirits and vinegar (0.4)Dairy (0.3)Fat products except edible oil (0.3)Meat (2.8)Soybeans (28.8)Cereal food, flour, starch (3.4)Beverages, spirits and vinegar (2.9)Meat (1.6)Fish & crustaceans (0.3)Oil seeds (except soy bean) (2.3)Fish & crustaceans (0.9)Grains (0.9)Soybeans (0.8)Edible vegetables and certain roots, tubers (0.6)Animal fodder, Residue, wastes of food (0.5)Meat (0.5)Brazil32.6EU (ex. UK)11.4US14.2Canada (7.7)New Zealand (6.7)Australia (6.8)Indonesia (5.1)Thailand (5.6)Russia (3.2)Malaysia (2.3)UK (0.7)0.3 0.1 1.5 1.4 0.5 1.3 0.1 1.8 0.5 0.6 0.4 0.4 3.0 1.3 3.0 2.0 0.5 0.4 0.2 0.8 1.0 0.1 0.1 0.2 0.4 0.1 0.3 0.2 0.8 0.4 2.0 1.5 1.6 1.4 012345678UKMalaysiaRussiaThailandIndonesiaAustraliaNew ZealandSoybeansMeatGrainsFish & crustaceansDairyPalm/Edible oilFruits, NutsBeverages, spirits and vinegarAnimal fodder, Residue, wastes of foodEdible vegetables and certain roots, tubersCereal food, flour, starchOil seeds (except soybeans)Fat products except edible oilCocoa and cocoa preparationsMeat productsOthersImports from major suppliersImports from othersBrazilUSEU (ex. UK)Canada 3 Equities & Economics ● Agribusiness February 2020 HSBC Global Ag/Food Coverage Company BBG Analyst Currency Rating Target price Closing Market cap __EV/EBITDA__ __P/E__ Ticker price USD m 2020e 2021e 2020e 2021e LatAm Agribusiness Adecoagro AGRO US Alexandre Falcao USD Buy 9.00 7.37 866 5.0 4.2 12.8 7.6 Sao Martinho SMTO3 BZ Alexandre Falcao BRL Buy 24.00 25.04 2,092 6.0 5.2 16.1 14.3 Cosan SA CSAN3 BZ Alexandre Falcao BRL Buy 68.00 81.4 7,564 6.4 5.6 17.6 15.9 Cosan Ltd CZZ US Alexandre Falcao USD Hold 15.00 22.18 2,783 2.7 2.2 12.8 10.4 Rumo RAIL3 BZ Alexandre Falcao BRL Hold 24.00 23.26 8,557 10.7 8.9 31.0 22.0 Median 6.0 5.2 16.1 14.3 Protein/Food Cranswick CWK LN Doriana Russo GBP Buy 36.30 35.72 2,423 13.2 12.2 22.8 21.4 JBS JBSS3 BZ Alessia Maria Apostolatos BRL Buy 37.00 28.12 18,107 4.0 3.7 5.7 6.0 Marfrig MRFG3 BZ Alessia Maria Apostolatos BRL Buy 14.00 11.25 1,888 2.9 3.0 7.1 8.8 Haid Group 002311 CH Andy Li* CNY Buy 43.00 33.00 7,428 13.7 11.7 19.4 16.6 Muyuan Foods 002714 CH Andy Li* CNY Hold 88.00 73.60 23,110 6.2 7.5 6.6 8.9 Wens Foodstuff Group 300498 CH Andy Li* CNY Buy 45.00 29.41 22,249 4.6 5.0 5.6 6.8 BRF S.A BRFS3 BZ Alessia Maria Apostolatos BRL Buy 41.00 31.57 6,053 5.0 4.5 8.5 10.6 Median 5.0 5.0 7.1 8.9 Biotech Jinyu Bio-Technology 600201 CH Andy Li* CNY Buy 24.00 18.79 3,014 13.6 9.4 35.5 25.6 Genus GNS LN Anand Date, CFA GBP Buy 32.60 30.80 2,608 25.0 22.1 37.6 33.4 Median 19.3 15.8 36.5 29.5 Global Fertilizers CF Industries CF US Alexandre Falcao USD Buy 55.00 39.75 8,643 7.4 6.7 16.0 13.8 Mosaic MOS US Alexandre Falcao USD Buy 28.00 19.96 7,560 4.7 3.9 10.6 8.3 Nutrien NTR CN Alexandre Falcao USD Buy 62.00 42.84 24,541 6.3 6.0 13.8 13.4 Saudi Arabian Fertilizer SAFCO AB Nicholas Paton, CFA SAR Hold 77.60 74.00 8,218 14.9 12.3 20.8 16.9 OCI NV OCI NA Nicholas Paton, CFA EUR Buy 26.60 15.25 3,553 4.1 2.8 6.5 5.1 Median 6.3 6.0 13.8 13.4 China Fertilizer Zangge Holding 000408 CH Eric Shen CNY Buy 9.93 6.33 1,798 4.3 2.7 7.7 6.4 Xinyangfeng 000902 CH Eric Shen CNY Bu...
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