Lei CAI: Great Opportunities in Four Kinds of Agriculture Enterprises

2013-01-24

According to the current statistics, both the number of investors and investment amount of agricultural investment in 2012 reduces dramatically, comparing with that of last year. There are more than 42 investment cases with a total value of 1.6 billion yuan (the investment amount for part of cases unavailable now) in 2012, while the total value of 89 agriculture investment cases is up to 1.104 billion US dollars in 2011. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The collection and investment amount of PE and VC industry reduces, which is partially influenced by the macro-economic situation. In addition, 2012 is “a sluggish year” for operation of agricultural economy. The agricultural product price falls, which results in the drop of enterprise profit in agriculture and constitutes the main reason for slow investment.a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Good Opportunities for Agricultural Investment in 2013a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

First, the whole macro-economic situation is continuously improved, and economic upswing will certainly promote the development of agricultural economy. After the slump in 2012, the price of some agricultural products will rebound in 2013, for example, pork price. The relevant agriculture enterprises will benefit from this trend. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Second, the rural population and the labor for agricultural production reduce with the acceleration of urbanization, which brings some opportunities for the development of agriculture enterprises. According to the research of the Institute of Population and Labour Economics of the Chinese Academy of Social Sciences, the urbanization rate is over 50% in 2010. The urban population exceeds the rural population for the first time. There is still a great distance compared with the urbanization rate of 70%-80% in the developed countries. The process of urbanization will last for 10~15 years with a growth rate of about 2%. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Third, consumption upgrading and the emphasis on food safety bring many opportunities for the development of agricultural enterprises. The food safety problems attract more and more attention in recent years, so the agricultural products supplied by a large number of scattered farmers cannot solve this problem. This problem would be settled by the standardized and factorized agricultural enterprises in the long run. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Four types of enterprises will stand out in the future. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

1. Large-scale agriculture. Agriculture is a traditional industry. In the past development process, a lot of large enterprises including companies engaged in planting and breeding of bulk farm products grew fast. This type of enterprise features obvious scale advantage and strict fund demands. The newly-established enterprises in this field won’t develop competitive advantage in a short term. This kind of enterprises with relatively stable profitability and medium rate of profit is regarded as “cash cow” enterprise, and can be expanded and replicated rapidly. Meanwhile, this type of enterprises can be expanded upstream and downstream, and the industry chain can be extended under the guarantee of stable cash flow. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

2. Technology-based agriculture. As the new technologies are continuously applied to agriculture, the agricultural technicalization is higher and higher, for example, seed, pesticide, veterinary biological products, etc. The common features of these enterprises include high technical barriers in specific fields, development by virtue of a great deal of manpower and material resources in a long term and high threshold. This type of enterprises is commonly highly estimated in the secondary market and enjoys high popularity among investors. The products supplied by these enterprises can be sold in the market after registration and certification, and are more likely to obtain the support of national industry policies and benefit from industry integration. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

3. Brand agriculture. With the constant improvement of people’s living standard, the safety problems of agricultural products attract more and more attention of people. Many consumers would rather spend more money to buy safe food, which brings business opportunities to brand agriculture enterprises. Besides traditional food safety certifications including “green” and “organic”, the big brand deep processing products are popular with consumers. The brand agriculture is consumption goods in nature, develops competitive advantage by virtue of brand and channels, and wins recognition of consumers. Meanwhile, it will enjoy high customer loyalty. Brand agriculture possesses a small quantity of customers. More and more people will join in this consumer group with the increase of residents’ income.  a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 4. Innovative agriculture. Agriculture is a traditional industry. Many production modes that were used for hundreds of years and even over one thousand years are still used nowadays. We are seeking for the new business mode which can subvert the traditional production mode, for example, the application of information technology in agriculture production. We firmly believe that the small technical progress in the agricultural field may bring huge changes. a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 (Source: The Founder )a8A九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

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