High-intensity of biomass fuel ethanol faucet in Fengyuan

The large corn deep-processing enterprise controlled by Cofco Group----Fengyuan biochemistry (000930.　　SZ) is one of the country's four producers of fuel ethanol, and as a result of the overlap between Cofco's COFCO Holdings, the two companies are likely to consolidate and the restructuring is expected to be a catalyst for the company's share price. Cofco holds a 20.74% per cent stake in Fengyuan Biochemistry and is its largest shareholder, while Cofco Holdings (00606).　　HK) also has the fuel ethanol business, its listing and Cofco Group signed the "Non-competition Agreement" under the provisions of the purchase of the biological stock of Fengyuan options and preemptive rights, if not next year, Cofco must sell it to unrelated third parties. Huatai Securities in the study said: "In the long term, high oil prices in the background, fuel ethanol development prospects, COFCO Group to abandon the biological potential of Fengyuan is very small, the future is expected to integrate its bio-fuel assets to build the country's largest biofuels platform, the company's asset restructuring expected strong, The 2011-Year grain-holding board's decision to exercise the company's preemptive rights will be a catalyst for stock prices. At present, the production capacity of Fengyuan biochemistry and Cofco is 440,000 tons and 380,000 tonnes respectively. Fengyuan biochemistry is mainly produced by maize.　　Corn prices have soared this year, food security has become the focus of public opinion, "machinery and people struggle for food" debate is growing, so the future of corn ethanol capacity amplification is very small.　　However, the trend of substitution of fuel ethanol for gasoline has not changed, and the future development of non-grain ethanol is huge, while Cofco's Guangxi Cofco Biomass Energy Co., Ltd. is the only plant that uses cassava to produce fuel ethanol. In addition, COFCO group in the research and development of cellulose ethanol is also a pioneer in China.　　Therefore, if the fuel ethanol business of Cofco Group and the bio-chemical of Fengyuan are integrated, not only can increase the latter's imaginary space in the stock price, but also can make the fuel ethanol capacity of Fengyuan biochemistry double, optimize the company's product structure, and become the platform of the COFCO Group's integrated energy business. From Fengyuan Biochemical September 30 closing price of 8.09 Yuan, the company even do not consider the business integration with COFCO, its share prices are relatively undervalued, with a certain margin of safety.　　Analysts predict the share price is about 20 times times the forecast for 2010 and 2011, well below the average P/e ratio of the corresponding agro-pastoral and new energy sectors.　　At present, fuel ethanol contributes the most to the income of Fengyuan biochemistry, at about 50%, the income contribution of organic acids such as citric acid and lysine are about 20% and 10% respectively. According to the National Ministry of Finance in 2007, "biofuel ethanol elasticity subsidy financial management measures", fixed-point bio-fuel ethanol production enterprises enjoy the financial subsidy of flexibility.　　The government regularly calculates the price of ethanol settlement and the cost of production to calculate the reasonable subsidy price, which is adjusted retroactively according to the amount of fuel ethanol sold before the enterprise. In the last three years, the gross profit margin of fuel ethanol business plus government subsidy has reached 20%.Above, for the Fengyuan biochemical bring stable profits. The company's current subsidy is the first-quarter accounting results, for 1659 yuan/ton, and then corn prices rose sharply, but the company's first half of the fuel ethanol business in addition to government subsidies after the gross profit margin of only 14.09%, lower than the annual subsidy, Huatai Securities analyst Xiao Hui forecast, such as future corn prices continue to maintain high　　, if gasoline prices do not rise in the second half of the year, the Treasury Department will adjust the subsidy prices to ensure stable profits of fuel ethanol business. In addition, Fengyuan Biochemistry is the second largest citric acid production enterprise, with an annual output of 220,000 tons, accounting for the national total capacity of 17.89%, products are mainly export-oriented, export products accounted for about 60% of total production.　　The company's advantage in fermentation technology makes its average cost per ton of citric acid is more than 700 dollars, much lower than domestic and foreign peer industry companies.　　Although citric acid is a highly polluting industry, especially when corn prices are soaring, deep-processing enterprises are the focus of attention, but an industry analyst to the first financial daily newspaper, "financial" reporter said that even if the state intervention policy, affected by the more small enterprises, as the industry leader in the biotechnology may still be neutral biased news. Risk tip: The sharp increase in corn prices on fuel ethanol business profit erosion, and COFCO group business integration can not be achieved.