Equity Research 30 June 2020 CORE Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 58. Restricted - Internal Americas Agribusiness From Farm to Consumer – Initiating ADM and BG at OW We are initiating coverage on ADM and BG with both stocks rated Overweight: Global grain processors, in our view, are well positioned to capture future growth, as demand for agricultural products increases on the back of a growing population. ADM and BG both source raw materials from the most productive regions (North and South America), while having an extensive global logistics network, allowing both companies to connect farmers to consumers. While the industry is exposed to several risks, which should not be underestimated, we believe the very particular investment thesis of ADM and BG can create shareholder value. ADM (OW, $52 price target) – Delivering on its transition from a commodity company to a value-added nutrition company: ADM, in our view, has taken the right steps in the past, reshuffling its portfolio and adding the value-added nutrition business to its portfolio. The segment not only fits well due to vertical integration, it should also allow ADM to grow sales at higher rates while expanding consolidated margins, as the business has an intrinsically higher earnings power. Although short-term risks related to trade, COVID-19, and weather, among others, can have an impact on results, we see in the medium term a higher level of profitability, which drives our $52 price target. BG (OW, $55 price target) – Still in the early stages of its transition story: With over 200 years of history, BG very recently embarked on its transformation journey. In early 2019, BG put a new and motivated management team in place to lead the transition, and we expect the company to further deliver in 2020 on the early success of its restructuring. While BG is exposed to the same risks as ADM, we see its international diversification as one pillar for potentially more stability within the commodity-intense segments; that said, BG lacks a sizeable and higher-margin segment compared to ADM. With growing demand from China and Africa, North and South America will be the “natural suppliers” of agricultural products: In that particular context, we see ADM and BG best positioned to leverage their logistics capabilities to actually bring ingredients from farmers to consumers. Acting in a sustainable manner will be key, and we believe both companies recognize that sustainable agriculture will in the end benefit them, even if there is a cost at the beginning. Operating in one of the industries most exposed to climate change, ADM and BG have both emphasized sustainable and responsible agriculture activities, as in farming lies their future and neither company can afford to risk what they most need – plenty of crops. INITIATING COVERAGE Americas Agribusiness NEUTRAL Unchanged For a full list of our ratings, price targets and earnings in this report, please see table on page 2 Americas Agribusiness Benjamin M. Theurer +52 55 5241 3322 benjamin.theurer@barclays.com BBMX, Mexico Antonio Hernandez, CFA + 52 55 5241 3323 antonio.hernandez@barclays.com BBMX, Mexico Barclays | Americas Agribusiness 30 June 2020 2 Summary of our Ratings, Price Targets and Earnings Estimates in this Report Company Rating Price Price Target EPS FY1 (E) EPS FY2 (E) Old New 26-Jun-20 Old New %Chg Old New %Chg Old New %Chg Americas Agribusiness Neu Neu Archer Daniels Midland (ADM) N/A OW 38.93 N/A 52.00 - N/A 2.57 - N/A 3.14 - Bunge Limited (BG) N/A OW 40.22 N/A 55.00 - N/A 2.75 - N/A 4.42 - Source: Barclays Research. Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency. FY1(E): Current fiscal year estimates by Barclays Research. FY2(E): Next fiscal year estimates by Barclays Research. Stock Rating: OW: Overweight; EW: Equal Weight; UW: Underweight; RS: Rating Suspended Industry View: Pos: Positive; Neu: Neutral; Neg: Negative Barclays | Americas Agribusiness 30 June 2020 3 CONTENTS EXECUTIVE SUMMARY .................................................................................... 4 INDUSTRY OVERVIEW ...................................................................................... 6 Global Agriculture .......................................................................................................................................... 6 Af...
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