Fertile Ground for Expansion:  (From left): Financial PR's Ngo Yit Sung, Meifeng Securities Affairs Representative Liang Guojun, Meifeng Board Secretary Yang Dagao, Financial PR Managing Director Kathy Zhang, Meifeng Director of Executive Office Wang Dong, Aries Consulting Executive Director Mark Lee, and Meifeng Vice-Director of Technology & Economy Research Institute Tao Jiaming.  Photo: Aries Consulting

SICHUAN MEIFENG Chemical Industry Co Ltd (SZA: 000731) -- a Sinopec held chemical fertilizer firm -- is looking to expand aggressively into the auto fuel additive business, especially with the adoption of the stricter Euro IV emission standards this summer, though it would maintain its core focus on chemical fertilizers.

Sichuan Meifeng Board Secretary Yang Dagao told investors at the Aries Consulting-sponsored “Braving the Waves: China Investment Strategies 2013” conference that the southwest China-based enterprise was looking to move into new, high-growth areas.

“Sichuan Meifeng’s corporate strategy emphasizes developing into a ‘Chemical Energy Enterprise’ with new businesses expanding outside traditional fertilizer operations. Meifeng will develop auto-use urea (to reduce harmful diesel engine emissions) and energy conservation-related businesses.

"Our goal is to transform from a traditional fertilizer firm to one which also targets energy-petrochemical sector operations," said Mr. Yang.

Getting Acquainted: (From left): Financial PR Managing Director Kathy Zhang, Meifeng Vice-Director of Technology & Economy Research Institute Tao Jiaming, Meifeng Board Secretary Yang Dagao, Meifeng Director of Executive Office Wang Dong, Meifeng Securities Affairs Representative Liang Guojun and Financial PR's Ngo Yit Sung.  Photo: Aries Consulting

Meifeng will announce its full-year 2012 results soon following an impressive peformance for the first three quarters of last year.

For the January-September 2012 period, Meifeng’s operating revenue surged 53.2% y-o-y to 5.7 billion yuan, with operating profit up 16.6% at 267 million.

Net profit over the nine-month period rose by 15.3% to 227 million yuan.

Stepping on the Gas

Speaking at last week’s investment conference in Shenzhen featuring China, Hong Kong and Singapore-listed firms, Mr. Yang said the adoption of Euro IV emission standards on July 1, 2013 will open up the auto-urea market in China, and Sichuan Meifeng was poised to step on the gas.

Meifeng is a major producer of urea (left), used in both fertilizers and fuel additives.
Photos: Meifeng

Listed in Shenzhen in 1997, Meifeng is among the top 10 urea manufacturers in China, owning an annual urea production capacity of over one million tons.

“Meifeng will continue investing in agrichemical projects with the Mianyang Industrial Park in Sichuan targeted at two billion yuan in value upon completion,” said Mr. Yang.

Meifeng shares recently 7.72 yuan

The Shenzhen-listed firm recently announced it would join hands with investment group Messer to invest in industrial gas and liquid CO2 projects.

First phase operations will begin in the second half of 2013, and last year Meifeng’s two R&D projects in fertilizer production also obtained provincial expert recognition and approval.

In July 2002, Chengdu Huachuan Petroleum -- a wholly-owned subsidiary of Sinopec Corp -- became the largest shareholder of Sichuan Meifeng, making Sichuan Meifeng a listed nitrogenous fertilizer/natural gas resources enterprise.

Sichuan Meifeng manufactures and sells agricultural-use synthetic fertilizer, melamine and urea under the self-owned brand “Meifeng.”

Meifeng Board Secretary Yang Dagao said the firm is diversifying into auto-fuel additives.
Photo: Aries Consulting

Products are sold to 20 provinces in China and over 10 countries and regions around the world.

In 2011, for the first time in China’s 5,000-year old history, the number of the nation’s urban dwellers outnumbered its villagers.

“This urbanization shift is likely to have a net zero effect on fertilizer demand in the country as the overall population should remain somewhat constant,” Mr. Yang said.

He also said that non-chemical organic fertilizer operations in China were still very small and niche-like, and thus provided no discernible competition to Sichuan Meifeng’s business.

Looking ahead, Mr. Yang said unit prices for chemical fertilizers are more volatile, and market leaders like Meifeng possess competitive advantages given their market scale and growing product diversification.

Meifeng's market cap gives it more pricing power

“In the future, the overall direction of China’s fertilizer industry is heading for long-term stability, high efficiency and high functionality.

“Major fertilizer leaders are more competitive and more likely to benefit from industry consolidation as large-scale production facilities will replace small and obsolete peers,” he said.

Given Meifeng’s industry expertise and strong parental backing, Mr. Yang said the A-share listed chemical and fertilizer firm is set to find even more fertile ground for growth in China.

“Meifeng is in a privileged position to become the market leader as it enjoys above-industry technological expertise and higher gross margins. We also fully expect urea prices to go up this year.”

See also:

ZULAUF: China Shares Could Jump 30% In H1

SANGUINE SNAKE? Over 70% Of Shareholders Upbeat On 2013

China On Verge Of Historic Bull Run?

CHINA'S REAL ESTATE & RETAIL: Latest Happenings...

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