Global market demand has picked up and the price of salmon has risen. Salmon is rich in Omega-3 (unsaturated fatty acids) and 18 kinds of amino acids, which can promote brain development and improve body immunity. It has high nutritional value and caters to the current consumption trend. Norway and Chile are the main producing areas of salmon, accounting for about 80% of the global harvest. Barriers to industry entry are high and global supply growth is limited. The issuance of salmon culture licenses is strictly restricted by the government. Norway has restricted the issuance of salmon culture licenses since 1982. Chile has recently suspended the issuance of new culture licenses, resulting in high barriers to industry entry. According to the Meiwei 21 Salmon farming Industry report, the 21-year Atlantic salmon harvest was + 4% to 2.82 million tons compared with the same period last year, with a CAGR of 6% in 2011-20. As capacity continues to increase and the limit of seawater biomass is about to reach the ceiling, tighter regulation expects future harvest growth to slow (Kontali expects growth to slow to 4 per cent in 2020-24, of which 22 years will be less than-1 per cent).

The overall demand is strong, and the price of salmon has risen sharply under the condition that supply exceeds demand. In 2011-20, the sales volume of salmon industry reached 8% (volume: 6%, price: 2%). Global salmon prices affected by the epidemic fell sharply in 2011-20. With the weakening of the epidemic in the past 21 years, the consumer market demand for salmon gradually warmed up. At the same time, under the background of rising feed prices, beef and other animal protein increased higher, salmon replacement demand was strong, and global salmon consumption in 21 years was + 8% to 2.86 million tons. Among them, the United States / Brazil / Europe / Asia increased by 12%, 3%, 7%, 7%, respectively (according to the Meiwei periodic report). Market prices have gradually rebounded in the past 21 years, and the average price of FPI salmon in 21 years has increased significantly compared with the same period last year (1-21 weekly average price + 60.0%). According to forecasts by seafood analysts Kontali and ABGSC, when supply growth is less than 8.8%, salmon prices will remain high. We expect that with the gradual recovery of market demand from the epidemic, the price of salmon will remain high when supply exceeds demand, and there is a broad market space for the industry. For the European market, the Chinese salmon market still has a lot of room for development. According to the company's 21 annual report, at present, the per capita salmon consumption in China is 0.06kg/ year, and there is still much room for development in the European market (6-8kg/ year). With the improvement of per capita consumption level and health awareness, the market demand for Chinese salmon is expected to further increase. According to the China Customs Bureau of Statistics, China's imports of Atlantic salmon were 90800 tons in 19 years, increased rapidly in 2017-19 (CAGR reached 35.5%), fell to 53000 tons in 20 years, and + 8.9% to 57700 tons in 21 years compared with the same period last year. In the future, with the optimization of customs clearance policies and the weakening of the impact of the epidemic, China's salmon market is expected to gradually recover.

Focus on the field of high-quality animal protein, 22Q1 to achieve a turnaround. The company, formerly known as Wanfu Sheng Ke, changed its controlling shareholder to Jiawo Group in 16 years, Lenovo Holdings in 17 years, acquired National Star Food in 17 years, expanded its main business to fish trade and processing industry, and acquired AustralisSeafoods S.A., a Chilean salmon company in 19, to control high-quality and scarce resources at the upstream aquaculture end, and further promote the synergy of seafood business. The company focuses on the field of high-quality animal protein represented by imported seafood and adheres to the development strategy of "global resources + Chinese consumption". The 21-year income is from + 1.6% to 4.597 billion yuan compared with the same period last year. Among them, seafood such as salmon / narrow cod, Arctic sweet shrimp, beef and mutton accounted for 69.2%, 18.6%, 12.1% respectively.

22Q1's revenue from the same period last year was + 6.2% to 1.223 billion yuan. To achieve a turnaround, the net profit reached 110 million yuan (a loss of 156 million yuan in the same period last year). The main reasons are: 1) the continuous recovery of global demand and a sharp rise in salmon prices (Australis Atlantic salmon sales price + 61.4% compared with the same period last year), 22Q1Australis gross profit rebounded significantly, year-on-year + 27.21pct to 19.0% Magi 2) Qingdao Guoxing subsidiary income resumed growth, net profit reversed losses. 3) 3R prefabricated vegetables continued to develop, and the proportion of 22Q1 Australis value-added products increased, which was + 18% compared with the same period last year. We believe that the company's profitability is expected to continue to improve, mainly benefiting from: 1) the rebound in global market demand, the high price of salmon, 2) promoting the development of value-added products and expansion of the domestic market, and 3) strengthening cost control. enhance industrialization and intelligence.

Master scarce salmon license resources, Australis aquaculture technology leading industry. In July 19, the company cut into the salmon industry through mergers and acquisitions, mainly with Chilean subsidiary Australis to carry out salmon business. Salmon revenue in 20 years was + 131.3% compared with the same period last year, mainly due to the increase in production capacity (from + 42.9% to 100000 tons) and the impact.

Year-on-year revenue in 21 is + 2.9% (volume:-14.3%, price: + 20.0%). The main reasons are: 1) the demand of the industry is picking up, the price of salmon is on the rise, and 2) the epidemic affects the pace of seedling investment and harvest. The harvest of Australis salmon in 21 years is-22% year on year. In 21 years, the sales of whole fish / fish fillet / value-added products accounted for 41.3%, 50.9% and 7.8%, respectively. Chile subsidiary Australis has a number of core advantages: 1) grasp the scarce license resources, the operation layout of the whole industry chain. In the context of the slowdown in the growth rate of industry supply, Australis holds scarce license resources, making it the salmon enterprise with the largest actual output in Chile's 12 districts; its business covers the whole process of salmon culture, fishing and processing, and provides higher profit space for the layout of the whole industry chain. 2) the aquaculture technology is leading the industry, and the quality control ability is strong. In 21 years, the feed conversion rate of Australis salmon is better than the industry average, and the mortality rate is controlled at 6.4%, which is much lower than the Chilean industry average (15.3%). It has won a number of quality control awards, including four-star BAP certification, full-cycle healthy breeding certificate (issued by Chilean fishery regulatory authorities), and so on.

Sales market all over the world, strengthen the expansion of the domestic market. The company's sales markets include North America, South America, Europe and Asia. In 21 years, the domestic / foreign market revenue is + 7.0% and 0.4% respectively compared with the same period last year, and the revenue share is 19.5% and 80.5% respectively. Among them, the overseas customers of salmon business are mainly terminal retailers and distributors, and the sales of Australis in North America / South America / Europe / Asia Pacific account for 40.6%, 21.0%, 20.7%, 17.7%, respectively. In the future, the company will expand opportunities in other salmon producing areas around the world; narrow cod is exported to overseas food manufacturers, distributors, supermarket chains, and so on. The company continues to consolidate the United States, Europe, Asia Pacific and other overseas markets, taking the Chinese market as the key development direction, and maintains close cooperation with large-scale merchant supermarkets, importers and exporters, processors, chain restaurants and other offline channels and new retail platforms such as Box Ma Xiansheng.

In 22 years, the company will focus on 5 sales channels (distribution / retail / catering / monopoly chain / gift) to promote business growth in China through multiple measures: 1) promote the establishment of local sales centers to meet the needs of the local market. 2) in view of the current situation of 90% of domestic salmon selling through catering channels, we plan to set up a professional catering sales team to provide semi-finished solutions in addition to supplying products. 3) the establishment of fresh-cut salmon chain stores, gift market, etc., the company is expected to seize the first opportunity after the recovery of the Chinese market by virtue of its brand and channel advantages.

The company will strengthen the development of value-added products and release production capacity to help reduce costs and increase efficiency. The company continues to develop value-added products, launched 3R prefabricated dishes "Jiawo Xiansheng" series in 20 years, launched "Chanxiong classmate" and "Mama Bear" brands for children's nutritious diet market in 21 years, and introduced high-end Antarctic song Southring product line in the domestic market. The sales volume of Australis value-added products in 21 years was + 45% compared with the same period last year. The new plant will release 72000 tons of capacity in 22 years. In 21 years, the company's overseas processing capacity reached 100000 tons, and at the end of March 22, the construction of a new processing plant in the 12 districts was completed and entered the trial operation stage, which is the first large-scale intelligent processing plant in the region. After it is put into production, it will add 72000 tons of processing capacity, which will help to reduce costs and increase efficiency. At the same time, the company plans to further improve profitability by providing processing services for other salmon farmers in the region. The company's salmon processing plants are located in Qingdao and Chengdu, which will fully protect the product processing demand and national performance capacity. In 22 years, the company will strengthen cost control, further enhance the degree of industrialization and intelligence, continue to maintain the advantage of feed conversion rate, and reduce the impact of rising breeding costs. The company plans to raise an additional 516-773 million yuan from the major shareholders. In April 22, the company issued a plan to issue A shares to specific targets, with plans to issue an additional 3484-52.26 million shares to the major shareholder Jiawo Group, accounting for 20% of the total share capital. The issue price is 14.8 yuan per share. The raised funds will be used to supplement current funds. This increase will help to optimize the company's capital structure and improve its financial situation.

Qingdao National Star business is gradually recovering, and the synergy effect contributes to the penetration of salmon market. Qingdao Guoxing, a subsidiary of Qingdao, is the largest import distributor of Arctic sweet shrimp and processing supplier of narrow cod in China, with a leading position in the industry and a stable group of overseas customers, and actively develops the domestic market. will narrow cod, flounder and other superior products to the market in the form of prefabricated dishes to upgrade. Affected by the epidemic over the past 20 years: 1) the decline in domestic demand for seafood, 2) the increase in port eliminate virus fees and demurrage, 3) the slow recovery of the domestic inbound and outbound shipping supply chain, the export of products such as narrow cod has been affected to a certain extent. Under the high cost, Qingdao Guoxing has lost money continuously for 20-21 years. By flexibly changing the product form, strengthening the development of value-added products, reducing the level of sales channels, channel expansion and close distribution and other measures to actively respond to the challenges, 22Q1 Qingdao National Star revenue achieved restorative growth, year-on-year + 5.3% to 238 million yuan, net profit to reverse losses. In 22 years, the company will increase the coordination between Qingdao National Star and salmon business to improve the speed of salmon market penetration.

Profit forecast and investment suggestion

Combined with the historical data of the company's various businesses, we make the following assumptions:

Salmon: benefiting from the pick-up in industry demand and rising prices, the continuous development of value-added products and the expansion of the domestic market, it is assumed that the income growth rate in 22-24 is 37.8%, 23.1% and 16.6% respectively, and the gross profit margin is 17.8%, 19.3% and 20.8%, respectively.

Seafood such as narrow cod and Arctic sweet shrimp: assume that the annual income growth rate in 22-24 is 9.2%, 8.1% and 8.1% respectively, and the gross profit margin is 12.4%, 12.9% and 13.4% respectively.

Beef and mutton and other products: assume that the income growth rate in 22-24 is 18.0%, 18.0% and 18.0% respectively, and the gross profit margin is 5.5%.

Other businesses: assuming that the income scale remains the same in 22-24, the gross profit margin is 15.8%.

We estimate that the operating income of the company in 2022-24 is 59.79,71.86 and 8.301 billion yuan respectively, which is + 30.0%, + 20.2% and + 15.5% respectively compared with the same period last year. The net profit of returning home is 2.40,3.85 and 543 million yuan respectively, and the EPS of + 183.0%, + 60.5% and + 41.2% are 1.38yuan / share, 2.21yuan / share and 3.12yuan / share respectively.

The company is one of the top ten salmon companies in the world. compared with overseas leading enterprises, the per ton market value (market value / salmon harvest) is on the low side. With reference to the valuation of A-share comparable company, the company is given 20-25 times Pmax E in 2022, corresponding to a reasonable value range of 27.52-34.40 yuan. For the first time, the coverage gives it a rating of "better than the market".

Risk tips: COVID-19 epidemic situation repeated, feed cost fluctuations, natural disaster risk, food safety risk.