Summary:
Incident: Zhangzi Island released its third quarter performance report. In the first three quarters of 2017, the company achieved revenue of 2.32 billion yuan, an increase of 6.55% over the previous year, net profit attributable to 77.68 million yuan, an increase of 144.02% over the previous year, and earnings of 0.11 yuan per share.
Comment: The reason for the high increase in the company's performance this year is that it has promoted online construction and outreach cooperation for varieties such as shrimp and scallops, snack foods, and sea cucumbers. The company's construction in cold chain logistics has also strengthened the company's “cost savings” and contributed to the company's performance.
The sales volume of the company's own Tmall store and the revenue of Liangpin stores have exceeded 100 million since August last year. The joint sales volume with Liangpin Store is expected to be 240 million in 2018, further boosting snack food sales.
Coinciding with this year's fishing break being relatively close to New Year's Day, sea cucumbers, etc. have entered a high production period, and the price of seafood has increased greatly. This has had a good boost for the company's gift box products as well as market products. As can be seen from the company's Tmall flagship store, the price of 50g of 15-20 heads of sea cucumber is 559 yuan, and the price of 8-10 heads of sea cucumber is 429 yuan, which is a strong discount.
According to customs data, China's aquatic products export data increased by 4% from January to August 2017. The company's foreign business already accounts for 20% of the company's profit this year, with an average gross profit of 6.77%. Under the assumption that export volume continues to increase, the company will continue to benefit.
Profit forecast: We forecast the company's 2017-2019 EPS to be 0.17, 0.26, and 0.30 yuan respectively, giving the company an “increase in holdings” rating.
Risk warning: 1) the risk of market changes; 2) regulatory risks; 3) the risk of industrial policy changes.
