CICC has released a research report initiating coverage of Sinochem Fertilizer (00297) with an "Outperform Industry" rating and a target price of HK$1.60, implying 30.6% upside. The target price is based on relative valuation, corresponding to 7.7x/7.1x P/E for 2026/2027. The firm estimates the company's 2026/2027 EPS at RMB 0.18/0.19, with a compound annual growth rate of 2.7% from 2025 to 2027. The company is one of China's core fertilizer traders.
Leading domestic agricultural input distributor and service provider, one of the main channels for potash imports
The company is a leading domestic distributor and service provider of agricultural inputs. By 2025, it has established a distribution and service network and warehousing and logistics network covering 96% of agricultural counties and cities nationwide, with more than 50,000 agricultural cooperative distribution outlets. The company has over 60 years of international trade experience and has established long-term strategic partnerships with companies such as Canada Potash and Jordan Potash, making it one of the main channels for potash imports in China. In 2025, the basic business segment where potash is located recorded a profit of RMB 874 million, accounting for 54% of total segment profit.
Advancing "Bio+" strategic transformation, phosphate rock capacity expansion continues
The company is building a research and development system based on biotechnology, promoting the commercialization of bio-fertilizers through an integrated research, production, sales, and service operating system. In 2025, bio-fertilizer sales volume and gross profit reached 1.54 million tons and RMB 790 million, respectively, with compound annual growth rates of 40% and 42% from 2022 to 2025. On the production side, the Meizuishao phosphate rock mine's expansion project with an integrated mining and processing capacity of 2.2 million tons per year is steadily progressing. The firm believes that phosphate rock resources are expected to further play a synergistic role.
Focusing on dividends to enhance shareholder returns
Since 2021, the company's dividend payout ratio has consistently remained above 30%. Based on the share price on September 28, 2026, the 2025 dividend yield reached 5.7%. The firm believes that with stable operations and abundant cash flow, the company is expected to safeguard shareholder returns.
Bio-fertilizer sales growth helps stabilize profitability
CICC noted that the market is concerned about the impact of potash industry prosperity sustainability on profitability. The firm believes that the potash industry prosperity is expected to continue in 2027, and bio-fertilizer sales growth will help stabilize the company's profitability.
Earnings forecast and valuation
The firm estimates the company's 2026/2027 EPS at RMB 0.18/0.19, with a compound annual growth rate of 2.7% from 2025 to 2027. Currently, the company's share price corresponds to 5.9x/5.4x P/E for 2026/2027, while the average P/E of comparable A-share companies for 2026 is 11.3x. Considering the Hong Kong stock liquidity discount, the firm assigns a 2026 P/E of 7.7x, initiates coverage with an "Outperform Industry" rating, and sets a target price of HK$1.60, implying 30.6% upside. Potential catalysts include potash prices rising beyond expectations and bio-fertilizer sales growth exceeding expectations. Risks include a significant decline in potash prices, fluctuations in large contract prices, intensifying competition in the compound fertilizer market, and the impact of external environment fluctuations on import channels.