CICC: Target price of HK$1.60 for the initial “outperforming industry” rating for Sinochem Fertilizer (00297)

The Zhitong Finance App learned that CICC released a research report saying that it covered Sinochem Fertilizer (00297) for the first time and gave it a “outperforming industry” rating. The target price was HK$1.60, which corresponds to an upward space of 30.6%. The target price is based on the relative valuation method and corresponds to the 2026/2027 price-earnings ratio of 7.7/7.1. The bank expects the company's EPS to be 0.18/0.19 yuan in 2026/2027, respectively, with a compound annual growth rate of 2.7% from 2025 to 2027. The company is one of the core fertilizer traders in China.

CICC's main views are as follows:

Leading domestic agricultural input distribution and service provider, one of the main channels for potash fertilizer imports

The company is a leading domestic agricultural input distribution and service provider. In 2025, it has built a distribution service network and warehousing and logistics network covering 96% of the country's agricultural counties and cities, and has more than 50,000 agricultural cooperative distribution outlets. The company has more than 60 years of international trade experience and has established long-term strategic cooperative relationships with companies such as Canadian Potash and Jordanian Potash, and is one of China's main channels for potash fertilizer imports. In 2025, the basic business segment of the company's potash business had a profit of 874 million yuan, accounting for 54% of the total profit of the division.

Promote the transformation of the “bio+” strategy and continue to expand phosphate ore production capacity

The company has built a biotechnology-based R&D system and promoted the commercial transformation of biofertilizers through an integrated operation system for R&D, production, marketing, and services. Biofertilizer sales and gross profit reached 1.54 million tons and 790 million yuan respectively in 2025, with compound annual growth rates of 40% and 42% respectively. In terms of production business, the Unleased Phosphate Mine project to expand the scope of the mining area by 2.2 million tons/year is progressing steadily. The bank believes that phosphate resources are expected to further develop synergy.

Focus on dividends to enhance shareholder returns

The company's dividend rate has continued to be above 30% since 2021. Based on the stock price on September 28, 2026, the dividend rate for 2025 was 5.7%. The bank believes that in the context of steady operations and abundant cash flow, the company is expected to guarantee shareholder returns.

Increased biofertilizer sales help stabilize profits

CICC pointed out that the market is concerned about the impact of the continued boom in the potash fertilizer industry on profits. The bank believes that the potash industry boom is expected to continue in 2027, and that the increase in biofertilizer sales will help stabilize the company's profits.

Profit forecasting and valuation

The bank expects the company's EPS to be 0.18/0.19 yuan in 2026/2027, respectively, with a compound annual growth rate of 2.7% from 2025 to 2027. Currently, the company's stock price corresponds to the 2026/2027 price-earnings ratio of 5.9/5.4 times. Compared to A-shares, the average P/E of the company in 2026 is 11.3 times. Considering the Hong Kong stock liquidity discount, the bank gave the company a price-earnings ratio of 7.7 times in 2026, covering the “outperforming industry” rating for the first time. The target price was HK$1.60, corresponding to an upward margin of 30.6%.

Potential catalysts include a higher-than-expected rise in potash prices and a higher-than-expected increase in biofertilizer sales.

Risks include a sharp drop in potash prices, large contract price fluctuations, increased competition in the compound fertilizer market, and external environmental fluctuations affecting import channels.