Tunhe May Produce Juicy Gains

CHINA IS EMERGING as a top banana in global tomato production, and some analysts say that makes shares of leading producer Cofco Xinjiang Tunhe Co. ripe for picking.

China is already well known as one of the world's biggest makers of manufactured goods such as personal computers and furniture, but it is also an increasingly important producer of produce. In recent years, the country's tomato output has soared, making it the No. 2 producer with a crop estimated at 4.6 million metric tons for 2007, about even with Italy, according to the France-based World Processing Tomato Council. That is still well behind the output of the U.S., which is expected to reach 10.9 million tons this year, but China is bigger than the U.S. in at least one tomato product: it is the largest global exporter of bulk tomato paste.

With an export value of about $380 million in the first ten months of this year, tomatoes are also among China's biggest export crops, and one of its fastest growing. Overseas sales of Chinese tomato products increased 43% in the first ten months of 2007 from the same period a year earlier, compared with 17% growth for farm products overall, according to China's Ministry of Commerce.

Fully half of China's output of tomato products and 15% of global tomato supply emanates from Cofco Xinjiang Tunhe, a Shanghai-listed company that is about 50% owned by state-run foods group Cofco Ltd. Tunhe owns 5,000 hectares of tomato fields and 21 tomato-product processing plants.

Tunhe supplies bulk paste to H.J. Heinz Co., Nestle SA and Unilever NV, and in China also sells to fast-food restaurant chains including McDonald's Corp. and Yum! Brands Inc.'s KFC. For more than a year, Heinz has provided Tunhe with seeds, processing equipment and research and development, both companies say, although they don't operate a formal joint venture. According to a Heinz spokesman, the Chinese company supplies about 5% of its bulk paste globally.

Tunhe lists A shares, primarily for domestic investors, in Shanghai. Its stock has already outperformed the hot Chinese stock market this year, and industry trends suggest the stock could remain a winner -- though some analysts say much of its value has been recognized by the market. 'Tunhe will maintain strong growth and provide outstanding investment returns,' predicts Chen Xun, an agricultural analyst at Ping An Securities Co. in Shenzhen.

Liu Shukun, an analyst at Shenzhen-based Lianhe Securities, also expects Tunhe, and smaller rival tomato producer Xinjiang Chalkis Co., should both outperform the Shanghai index over the coming year.

On Thursday, Cofco Tunhe shares finished at 19.36 yuan, about $2.64, up 156% so far in 2007, handily beating the benchmark Shanghai Composite Index's powerful 98% rise this year.

China is grabbing enormous global market share as a producer and exporter of agricultural and other food products, from fish to apples, creating big agribusinesses in the process. Tomatoes aren't a staple of the Chinese diet -- industry figures show consumption of just 0.6 kilograms per person, compared with 25 kilograms in the U.S. But local demand is growing 15% a year as eating habits broaden beyond traditional foods to include imported tastes such as spaghetti and French fries with ketchup.

China's tomato industry is concentrated in the remote western province of Xinjiang, where vast spaces allow for the construction of massive farms that take advantage of economies of scale in producing commoditized food products, such as tomato paste. The geography and weather are also ideal for employing low-temperature spray-drying technology that is used in developing tomato powder as a seasoning for soups and beverages, according to Tunhe.

The tomato boom appears so far unaffected by broader global concerns about the quality of Chinese products that have prompted major trading partners like the U.S. and Japan to scrutinize imported foods more carefully.

China's rising inflation doesn't appear as much threat to the sector. But a 'blight disease' in China's Inner Mongolia, near Xinjiang, was blamed for capping production in 2005 and 2006.

Tunhe has quickly become a company to watch in the industry, second only to California's Morning Star Packing Co. in global tomato production. Tunhe reported sales rose 68% in the first nine months of 2007 from a year earlier to 2 billion yuan ($272.3 million), while net profit jumped 124% to 169 million yuan.

Analysts say there is room for Tunhe to continue growing quickly, both by expanding its exports and with new product lines. Now 'is a good opportunity for Tunhe,' Ren Meijiang, an analyst at Orient Securities Co. in Shanghai, said in a recent report. He notes the company is now exploring a tomato-juice production line.

Some analysts, however, question whether Tunhe's valuation has soared too high too quickly. They note that some uncertainty overshadows the stock, because it is awaiting regulatory approval for a debt-equity swap that will push its volume of outstanding shares up 25%, thereby diluting the value of existing shares. And some analysts are critical of Tunhe's plans to enter the sugar-beet business. Shi Jiangang, an analyst at TX Investment Co. in Shanghai, pegs fair value closer to 11 yuan a share, sharply below current levels.

Analysts point to two other listed companies in the tomato business as options for investors keen on the sector -- although neither is as pure a tomato play as Tunhe.

Xinjiang Chalkis, for instance, gets about half of its revenue from the basic paste business but offers investors added exposure to end products and international markets following the takeover of a French company two years ago. The Shenzhen-listed stock lost 0.4% Thursday to end at 18.20 yuan, up 92% so far this year. The stock could hit 20 yuan in 2008, or possibly 30 yuan if the broader market surges again, says Huang Jun, an analyst at China Merchants Securities Co. in Shenzhen. 'There is still large room for increase,' according to Ms. Huang.

Xinjiang Tianye Stock Co., meanwhile, has a small exposure to the tomato business among its diversified interests in chemicals, farming, processing and real estate. Its Shanghai shares ended Thursday down 1.1% at 19.21 yuan. While Tianye's tomato business gets some analysts' attention, they say the company's diversification means moves in the stock price might be dictated by factors that don't have much to do with the industry.

中国正逐渐成为世界重要的番茄生产国，一些分析人士认为，现在投资中国最大番茄生产商中粮新疆屯河股份有限公司(COFCO Xinjiang Tunhe Co. Ltd.)的股票正当其时。

众所周知中国已是世界上个人电脑和家具等制成品的最大生产国之一；不仅如此，中国也日益成为重要的农产品生产国。据总部位于法国的世界番茄加工协会(World Processing Tomato Council)的数据，近年来中国的番茄产量大幅增长，已一跃成为世界第二大番茄生产国，2007年番茄产量估计达460万吨，与意大利接近。这个数字虽然仍远低于美国的产量（该国番茄产量今年预计将达1,090万吨），但中国至少有一种番茄产品的产量超过了美国──中国已是世界最大的大包装番茄酱出口国。

今年前10个月，中国的番茄出口值约为3.8亿美元。番茄已是中国出口量最大、出口量增长最快的农产品之一。据中国商务部的数据，今年前10个月，中国番茄产品的海外销售额较去年同期增长了43%，而同期农产品的总体出口额增长了17%。

中粮屯河为上海上市公司，国有粮食集团中国粮油食品（集团）有限公司(China National Cereals, Oils & Foodstuffs Corp.)持有其约50%的股份。该公司番茄产品产量约占中国总产量的50%，占世界番茄总产量的15%。中粮屯河拥有5,000公顷番茄种植田和21个番茄产品加工厂。

中粮屯河向亨氏(H.J. Heinz Co.)、雀巢公司(Nestle SA)和荷兰联合利华公司(Unilever N.V.)供应大包装番茄酱，并向麦当劳(McDonald's Corp.)和百胜餐饮集团(Yum! Brands Inc.)旗下KFC等在中国的快餐连锁店提供番茄酱。中粮屯河和亨氏均表示，过去一年多来亨氏一直在向中粮屯河提供番茄种子、加工设备和研发支持，虽然双方并没有正式成立合资公司。亨氏的一位发言人称，该公司的大包装番茄酱大约有5%是由中粮屯河提供的。

中粮屯河的股票在上海上市。今年中国股市狂飙，而该公司股票的表现甚至强于大盘，并且产业趋势显示该股可能会继续跑赢大盘，虽然一些分析人士称该股的大部分价值已经在市场上体现出来了。平安证券有限责任公司(Ping An Securities Co., Ltd.)驻深圳的农业分析师陈逊预测说，中粮屯河将保持强劲的增长，并提供极高的投资回报。

深圳联合证券有限责任公司(Lianhe Securities)的分析师刘树坤也预计明年中粮屯河以及规模较小的番茄生产商新疆中基实业股份有限公司(Xinjiang Chalkis Co. Ltd.)这两家上市公司的股票均应强于大盘。

中粮屯河周四的收盘价为人民币19.36元，约涨2.64元，较年初累计上涨了156%，远远超过上证综合指数同期98%的强劲涨幅。

中国作为从水产品到苹果等众多农产品和食品的生产和出口大国，正在全球市场上赢得巨大份额，并在此过程中造就了巨大的农业产业。番茄并非中国人的主要食品，产业数据显示中国的人均番茄消费量尽为0.6公斤；相比之下，美国为25公斤。但随着中国人的饮食习惯变得更加丰富，除了传统食品，还加入了意大利面和薯条等需要配番茄酱的进口食品，中国的番茄需求量正以每年15%的速度增长。

中国的番茄产业集中在西部边远省份新疆，那里幅员辽阔，可以建造大型农场，利用规模经济来生产粮食产品，比如番茄酱。据中粮屯河称，当地的地理和气候条件非常适宜采用低温和喷雾干燥技术来生产用作汤和饮料调味剂的番茄粉。

目前为止全球对中国产品质量的担忧似乎还没有波及到蓬勃发展的番茄产业。对中国产品质量的担忧已引起美国和日本等中国主要贸易伙伴加强了对从中国进口食品的审查。

中国不断加快的通货膨胀似乎并没有对番茄产业造成太大威胁。不过内蒙古发生的枯萎病却被认为是限制了2005年和2006年番茄产量的罪魁祸首。

中粮屯河迅速成为业内值得关注的一家公司，其番茄产量仅次于美国加州的Morning Star Packing Co.。今年前九个月，中粮屯河的销售额达人民币20亿元（合2.723亿美元），较去年同期增长了68%，净利润达人民币1.69亿元，增长了124%。

分析人士表示通过扩大出口并推出更多种类的产品，中粮屯河仍有继续快速增长的空间。东方证券股份有限公司(Orient Securities Co., Ltd.)驻上海的分析师任美江在最近的一份报告中指出，现在对中粮屯河来说是个好机会。他指出该公司目前正在建设一条番茄汁生产线。

不过一些分析人士质疑中粮屯河的股票估值是否涨得太快、太高了。他们指出一些不确定因素给该股蒙上了一层阴影──该公司的债转股计划仍待监管部门的批准，一旦获得批准，将会使公司总股本增加25%，进而摊薄现有股票的价值。还有一些分析人士对中粮屯河欲进入甜菜业务的计划提出了质疑。北京天相投资顾问公司(TX Investment Co.)驻上海的分析师施健钢认为该股合理价值接近每股人民币11元，远远低于目前的水平。

分析人士还为热衷于番茄产业的投资者推荐了其他两家上市公司，虽然这两家公司都不像中粮屯河一样只从事番茄业务。

比如，新中基有大约一半的收入来自于番茄酱生产，但鉴于它在两年前收购了一家法国公司，也由此承担了终端产品市场和国际市场的风险。该公司在深圳上市，其股票周四的收盘价为人民币18.20元，跌0.4%，但仍较年初上涨92%。招商证券股份有限公司(China Merchants Securities Co.)驻深圳的分析师黄(王君)说，如果股市总体再次飙升的话，2008年该股或会涨到人民币20甚至30元，还有很大的上涨空间。

新疆天业股份有限公司(Xinjiang Tianye Co. Ltd.)的业务多种多样，包括化工、种植、加工和房地产等，而番茄业务只占其中一小部分。该公司在上海上市，其股票周四的收盘价为人民币19.21元，跌1.1%。虽然新疆天业的番茄业务引起了一些分析师的注意，不过他们表示该公司业务的多样化意味着该股价格的波动可能会被与番茄产业没有多大关系的因素所左右。

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