Dec 2 last priceMarket capPENet margin (%)ROEDividend yield (ttm)*

China Bluechemical

HK$4.24HK$19.5 b14.629.618.72.5%
Sinofert HoldingsHK$3.96HK$27.8 b12.
Hunan TianrunRMB9.44RMB1.1b-2.11.2na
China XLXS$0.505S$505 m17.716.626.63.2%
Changjiang FertilizerS$0.245S$88 m4.528.670.4na
 Source: Bloomberg (*ttm: Trailing twelve month)

Fertilisers are big business given China's large agricultural base.

CHINA XLX FERTILISER, currently listed in Singapore, will be dual-listed in Hong Kong next Tuesday (Dec 8), an event that has aroused trading interest in the past week.

It had announced on Nov 24 that the l
isting committee of the Stock Exchange of HK had on 23 November granted an approval in principle for the dual listing.

The stock has since surged about 25% on the Singapore Exchange, closing at 51.5 cents yesterday (Dec 3).

As a result, China XLX ( has reached the highest historical PE of 17.7 among its HK, Singapore and China listed peers in the fertiliser production industry (see Bloomberg data in the table above).

Notably, China XLX,  which is the 6th largest coal-based producer of urea in terms of production capacity in the PRC, trades at a far higher valuation than its recently-listed peer on the Singapore Exchange, Changjiang Fertilizer (CJ Fertlizer).

Based on the recent 24.5 cents stock price, the latter trades at just 4.5 PE and below its backdoor listing price of 29 cents. Market attention turned to CJ yesterday, sending the stock up 2 cents to close at 26.5 cents.

Changjiang Fertilizer, however, is a relatively small player. It describes itself as "one of the larger small-and-medium size coal-based producers of nitrogenous fertilizer in Hunan Province in terms of production capacity."

China XLX's business has been having a rough time this year.
The net profit attributable to shareholders plunged 74% to RMB77 million in the first nine months.

This was mainly due to a decline in profit margin of all its products as a result of:

1) an increase in coal prices in 9M2009,
2) a decline in average selling prices of methanol and compound fertiliser,
3) a ramp up in the cost for the third plant, and
4) an increase in professional fees for the dual listing in Hong Kong.

The company said that the financial crisis and domestic oversupply conditions impacted the profitability of the urea industry in 9M2009.

“Based on our understanding, many companies in the industry are currently facing losses. However, due to our size and cost efficiencies, we continued to maintain our strong position in the industry,” it said.

The sharp fall in earnings this year will translate into a very much higher PE for China XLX.
RMB (‘000)3Q09% change9M09% change


Gross profit margin32.3%(1.1 ppt)30.8%(0.5ppt)
Net profit 21,95114.363,1845.6
EPS-diluted (RMB cts)6.1014.317.555.6
Source: CJ Fertilizer

In sharp contrast, Changjiang Fertilizer, which has a historical PE of just 4.5, will see its PE stable at around that level.

That's going by its recent announcement of
a 5.6% year-on-year growth in net profit to RMB63.2 million for the 9 months ended 30 September 2009 on the back of higher sales volume of its key products.

The Group’s revenue improved 8.1% to RMB224.8 million in 9M09 from RMB208.0 million in 9M08 on the back of higher sales volume for all products except methanol. The increase in sales volume helped offset a drop in average selling prices for its products.

Recent report: CJ FERTILIZER seeking to expand through M&A

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