Donghai Securities: Focus on innovation-driven enterprises, explore growth opportunities in the sub-sector of agricultural chemicals.

Donghai Securities released a research report stating that the pesticide industry, as a "technology-driven cyclical industry", has research and development investment and technological transformation capabilities as the core of long-term competitiveness. The focus is on small and medium-sized enterprises with significant differentiation advantages in specific fields (such as Sichuan Guoguang Agrochemical), which, although limited in scale, achieve high gross profit margins through product differentiation, brand premiums, or technological innovation. It has strong competitiveness in the field of plant growth regulators and has a certain valuation elasticity, making it suitable for growth-oriented investment allocation. The main points of Donghai Securities are as follows: Changes in the global pesticide market pattern from sales By 2025, the global pesticide industry will present a pattern of resilience and high differentiation: leading comprehensive agrochemical giants will achieve steady growth through synergies between seeds and plant protection, innovation pipelines, and cost optimization. The top five enterprises in the TOP20 are expected to account for 60% of the market share; some medium-sized enterprises will suffer from patent expiration, weak demand, and debt pressure, resulting in a significant decline in performance; Chinese enterprises rely on cost and capacity advantages to continuously increase their global market share, with Chinese enterprises occupying 12 seats in the TOP20 list. As of March 12, 2026, 20 domestic listed pesticide companies have released performance forecasts for 2025, with over 60% of companies expecting positive results. Restructuring of the pesticide industry logic from enterprise strategy changes Based on the strategic development changes of the TOP9 enterprises in 2025 (Syngenta, Bayer, BASF, Corteva, UPL, FMC, ADAMA, Sumitomo Chemical, Nufarm), the bank summarizes from five dimensions of capital operation, technological innovation, regional layout, digital transformation, and sustainable development to find that by 2025, the global agrichemical industry has reached a strategic watershed: the traditional "scale expansion + generic product" model is no longer effective, shifting towards value cultivation. The underlying logic has been restructured into a new production paradigm of "technological barriers capital efficiency ecological synergy." Technology-driven giants need to balance long-term research and development with capital and regional deepening to drive cutting-edge technology transformation into commercial success; operation-driven enterprises need to rely on operational advantages to establish professional barriers in specific areas to avoid low-profit margin competition. Financial portrait of domestic pesticide enterprises and strategic insights By profiling the data performance of Chinese listed pesticide companies (Shenwan Chemical Pesticide Sub-plate) in six dimensions: revenue and profit, cost control, product market, supply-demand relationship, business model, and research and development investment, it can be seen that Chinese listed pesticide companies have the following characteristics: significant differentiation in profit performance, coexistence of top stability and small-medium imbalance; significant differences in cost control, product competitiveness determines profit space; clear product structure, focusing on both domestic and foreign market layouts; the concentration of supply and demand is negatively correlated with revenue size, with small-scale enterprises at risk of concentration; the dominant business model is production-oriented; research and development scale and investment do not completely match, strategic differences dominate innovation effectiveness. Comparing the core competitiveness logic of international pesticide companies with the characteristics of Chinese enterprises, the bank proposes six core development insights, focusing on optimizing profit structure and strengthening innovation drive. Investment advice: Focus on leading companies and innovation, seize structural opportunities Priority should be given to leading companies to capture the cycle recovery and integration dividends. The industry has entered the inventory cycle bottom, with de-stocking close to completion by 2025, recent prices have continued to rise, with leading companies having stronger anti-cyclical capabilities and industry integration potential due to scale advantages, cost control capabilities, and low supply-demand concentration. It is recommended to focus on: Jiangsu Yangnong Chemical (prominent cost control, integrated leader backed by Syngenta), SHANDONG WEIFANG RAINBOW CHEMICAL CO., LTD (registration barriers, globalization, transition from ToB to ToC to improve gross profit margin), Lier Chemical (glyphosate leader). Optimize configuration of medium-sized leading companies in specific fields, with a focus on their own moats Medium-sized enterprises are often in a strategic dilemma between expanding scale and maintaining advantages. The bank recommends prioritizing companies with higher moats in terms of production processes, product markets, and self-developed technologies for attention: Limin Group (fungicide leader, AI application + biopesticides), Nantong Jiangshan Agrochemical & Chemicals (glyphosate leader representative, Guizhou base connecting upstream phosphorus resources), Anhui Guangxin Agrochemical (chlorine gas integration, abundant cash flow). Risk warning: Policy change risk; market competition and cyclical fluctuations risk; technological substitution risk.