Citi lowered its earnings forecast for Sinochem Fertilizer (00297.HK) by 86% and 73% from 2016 to 2017 to reflect losses for the first quarter of this year and weak profit margin expectations in the future. The rating was lowered from “neutral” to “sell-sale”, and the target price was lowered from 1.3 yuan to 0.9 yuan.

Citi expects that Sinochem Fertilizer may face the impact of factors such as inventory losses caused by falling fertilizer prices; structural weakness in sales in the distribution business; and poor contributions from Qinghai Salt Lake (000792.SZ).

The bank pointed out that the company's main fertilizer subsidiary recorded a loss of 172 million yuan before interest and tax in the first quarter. The company's sales have declined at an accelerated pace, falling 10% to 11% each year in 2014-15 (5% in 2013). In an environment where the Mainland Ministry of Agriculture limits the increase in fertilizer consumption, the company's prospects are grim. In terms of potash fertilizer, although it is still being applied and is expected to continue to record healthy growth, the company's market share in potash fertilizer distribution continues to decline.