Events:
In the first three quarters of 2021, the company achieved operating income of 5.312 billion yuan, an increase of 32.80% over the same period last year, and a net profit of 241 million yuan, an increase of 187.26% over the same period last year. Among them, revenue and net profit in the third quarter were 2.001 billion yuan and 91 million yuan respectively, up 27.46% and 293.92% respectively over the same period last year.
Comments:
The number of eels out of the pond continued to increase, and production capacity expansion continued to advance. Although the catch of East Asian eel seedlings decreased significantly in the new season, the company locked the eel seedling resources ahead of time by virtue of capital and industrial advantages, and the number of eels out of the pond increased rather than decreased. The eel output of the company in the third quarter is about 2400 tons, and it is expected to exceed 8000 tons for the whole year.
The company continues to move towards the medium-term goal of 50-60,000 tons of eel per year. In addition to increasing the purchase of eel seedlings, the company is also actively expanding its eel culture capacity. By the end of the third quarter, the company's projects under construction have increased significantly by 116% to 758 million yuan compared with the beginning of the year; fixed assets have also increased by 19% to 1.774 billion yuan compared with the beginning of the year, and the water area of fine aquaculture is expected to reach 2 million square meters in recent years. With the continuous expansion of production capacity, the company's eel output from the pond has maintained rapid growth and is expected to exceed 15000 tons next year.
Eel prices fall seasonally and may start to rise at the end of the year. Eel prices fell seasonally in the third quarter after the end of export orders for the Japanese Eel Festival in the second quarter. Generally speaking, the eel culture cycle is 1-2 years. Affected by COVID-19 's epidemic situation, the storage time of captured eel seedlings in ponds was prolonged last season, which also suppressed the current eel prices to a certain extent. However, as eel seedlings can only rely on natural fishing and can not be propagated artificially, a significant reduction in eel seedling catch is bound to lead to a reduction in eel supply in the future. With the eel coming out of the pond one after another in the early stage, the decrease in the certainty of eel supply in the new season will obviously support the price of eel.
The decline in costs offset the decline in fish prices, and eel culture maintained a high gross margin. Although eel prices fell somewhat in the third quarter, the increase in culture per unit area of water led to a significant decline in related amortization expenses, and the gross profit margin of eel farming remained above 40% in the third quarter. With the continuous replacement of the traditional soil pond in the company's intensive culture pond and the continuous expansion of the culture scale, the company's eel culture cost per ton still has some room to decline, and the cost advantage is expected to be further strengthened.
Profit forecast and rating: relying on the rich experience accumulated in the eel industry, the company has successfully cut into the field of eel culture. Since the beginning of this year, the scale of eel coming out of the pond has increased significantly, and the poor harvest of eel fry in the new season has led to a strong expectation of rising eel prices in the later period. We keep the company's net profit forecast for 2022-2024 unchanged, EPS is 0.78 and E is 22.73 and 10.57, respectively. Keep the target price unchanged at 25.32 yuan and reaffirm the company's buy rating.
Risk tips: the risk of eel price fluctuation, aquaculture epidemic disease, consumer demand is lower than expected.