Recently, the Ministry of agriculture and rural areas and other eight departments formulated and issued the national pesticide industry development plan for the 14th five year plan, adhering to the four principles of safe development, green development, high-quality development and innovative development to guide the transformation and upgrading of the pesticide industry.
The competition pattern of the industry is expected to continue to improve. The plan encourages the merger and reorganization of enterprises, the whole chain production layout, promotes the enterprise group, brand and international development of pesticides, gradually changes the pattern of many, small and scattered pesticide enterprises, and cultivates a number of competitive large and medium-sized production enterprises. The goal is to cultivate 10 enterprises with an output value of more than 5 billion yuan, 50 enterprises with an output value of more than 1 billion yuan and 100 enterprises with an output value of more than 500 million yuan by 2025, and reduce the number of pesticide production enterprises to less than 1600. We believe that the improvement of industry concentration is the development trend of the global and Chinese pesticide industry. After a series of mergers and acquisitions in the past few years, the Cr5 of the global pesticide industry has reached 75% in 2020, while the Cr5 of China’s pesticide industry is only 21%, and the output value of Chinese pesticide enterprises is generally small and their international competitiveness is weak, Therefore, the guidance from the policy level will boost the competitiveness of Chinese pesticide enterprises.
The capacity layout is expected to be continuously optimized. The plan requires that pesticide enterprises be guided to settle in the park, give play to the advantages of the park’s location and industrial chain, promote the optimization and strengthening of the industry, strengthen the withdrawal of high-risk and high pollution production capacity, and control excess production capacity. The goal is to increase the output value of pesticide production enterprises in the park by 10 percentage points by 2025. The plan proposes to focus on developing 31 pesticide production parks, including Jiangsu Xinyi chemical industry cluster, such as dongyangkou chemical industry park, Shandong Weifang Binhai Chemical Industry Park, etc. We believe that enterprises with safety and environmental protection advantages already in the park are expected to obtain better development opportunities, and the park development will also help these enterprises carry out the next round of capital expenditure cycle and improve their profitability.
Adjust the product structure and improve the utilization rate of pesticides. The plan requires to promote the reduction of the use of chemical pesticides, support the development of new chemical pesticides with high efficiency and low risk, vigorously develop biological pesticides, phase out and withdraw old pesticide varieties and dosage forms with strong resistance, poor efficacy and high risk, and strictly control high-toxic and high-risk pesticides and additives. The goal is to increase the utilization rate of chemical pesticides in major crops to more than 43% by 2025 by eliminating or limiting highly toxic and inefficient chemical pesticides, promoting efficient and accurate pesticide application, green prevention and control and other measures. We believe that at present, China’s pesticide industry has achieved “zero growth” in use, and the output and application amount of pesticides have decreased. In the future, the continuous upgrading of product structure will help to improve the utilization rate of pesticides, and high-efficiency and low toxicity pesticides will usher in better development opportunities.
Encourage R & D innovation. The plan proposes to establish a pesticide R & D and innovation system to develop and create 5-8 new pesticide varieties with independent intellectual property rights during the 14th Five Year Plan period by strengthening the R & D of green pesticides, strengthening the construction of creation capacity and improving the innovation mechanism. At the same time, the plan calls for the development of intelligent and efficient pesticide application technology, strengthening the construction of collaborative innovation platform, cultivating pesticide innovative talents, establishing China’s pesticide R & D and innovation system in an all-round way, and solving major key problems in China’s pesticide industry. We believe that some leading enterprises already have a certain R & D capacity of original drugs. At present, some innovative products have been commercialized. It is expected that the R & D capacity of such enterprises is expected to be further improved in the future, driving the enhancement of the overall competitiveness of China’s pesticide industry.
Investment strategy: we believe that under the guidance and promotion of policies, the concentration of China’s pesticide industry is expected to be further improved. We are optimistic about the long-term development prospects of industry-leading enterprises with safety and environmental protection advantages, strong innovation ability and reasonable product structure. Jiangsu Yangnong Chemical Co.Ltd(600486) , Lier Chemical Co.Ltd(002258) are recommended.
Risk warning: the implementation progress of the plan is not as expected; The product price fluctuates greatly; The prices of upstream raw materials and downstream Shenzhen Agricultural Products Group Co.Ltd(000061) fluctuated sharply.
