Syngenta AG, the world’s largest producer of crop chemicals, is threatened by an increasingly competitive market with Chinese manufacturers of pesticides looking to export more, Morgan Stanley said.
Chinese export volumes of crop-care chemicals are accelerating and Syngenta’s traditional competitors in the west are also focusing more on price as the pace of new product introductions and ingredient development declines, Morgan Stanley analysts including Amy Walker said in a note.
“We continue to believe the market is ignoring key risks in the Syngenta investment story,” Walker said. “Syngenta’s performance and valuation suggest the market expects further strong acceleration in top-line and profit growth. We see downside risk to the market’s bullish expectations.”
Syngenta’s market valuation could shrink by 38 percent in the worst-case scenario, where growth stagnates and generic competition hurts margins. While Syngenta will benefit from its integrated approach, spanning seeds and herbicides for each crop, the heightened competitive environment and limits on the returns from research will hamper its growth, the analysts said.
The bank set a price target for Syngenta shares of 445 francs in the best case scenario, falling to 205 francs in the worst case. Stock of Basel, Switzerland-based Syngenta fell 2 percent to 325.7 francs in Zurich today as of 12:20 p.m., valuing the company at 30.3 billion francs ($31.6 billion).