Items:
On July 29, 2019, the company signed a share subscription and shareholders Agreement with India's Royale Marine IMP-EX Private Limited (hereinafter referred to as "Royale") and its 11 shareholders, intending to use its own funds of US $4 million to subscribe for the newly issued shares of Royale. After the completion of this investment, the company or a wholly-owned subsidiary of the company will hold 25.30% of its shares, which is the second largest shareholder of Royale.
Comments:
The acquisition target is located in India, the main producer of prawns. Royale was founded in 2011 with a registered capital of 214 million rupees (about 21.31 million yuan). It is mainly engaged in the processing, refrigeration and sales of shrimp products, with BAP (Best Aquaculture practice) four-star certification, and the products are mainly sold to the United States, the European Union, China and other countries and regions. India, where the company is located, is one of the emerging major producing countries in the shrimp industry, with a current production capacity of more than 800,000 tons, accounting for about 20% of the global shrimp production. On the one hand, Indian shrimp has comparative advantages in raw material prices and labor costs. On the other hand, it has development potential in industrial space, processing level and so on. India exported 46000 tons of prawns to China in 2018, a sharp increase of 267 per cent, while prices fell 9 per cent.
The two sides complement each other's advantages and resources and give full play to the synergy of the industrial chain. Before the acquisition, the company has maintained a long-term and friendly cooperative relationship with Royale. After the merger, we can make full use of Royale's mature business foundation, standardized processing capacity and quality management system to give full play to the company's advantages in market, technology and capital to achieve coordinated business development between the two sides. At the same time, it is expected to take the joint venture company as the starting point, optimize the overall management of the company's Indian supply chain, increase the supply support to the American wholly-owned subsidiary SSC, and improve the overall supply chain level of the company.
The overseas layout has been continuously improved to consolidate the strategic foundation of globalization. With years of accumulation and layout, the company now has the global operation ability of covering the whole industry chain and all channels: on the one hand, by setting up sales offices in countries and regions such as Chinese mainland, the United States and Hong Kong, customers cover more than 40 countries and regions, achieving balanced development of global markets such as "China, the United States and non-American countries". On the other hand, by setting up procurement agencies in China, Southeast Asia and South Asia, South America, Saudi Arabia and other countries and regions, we have completed the layout of raw materials for comprehensive aquatic products such as prawns, tilapia and crayfish.
The consumption upgrade drives the aquatic product consumption market to have a broad prospect. With the continuous upgrading of domestic consumption, on the one hand, the importance of healthy diet promotes the upgrading and adjustment of China's food consumption structure. Aquatic products rely on the advantages of low fat content, high protein content, rich in a variety of trace elements and so on. The proportion of protein consumption is expected to continue to increase. On the other hand, the continuous innovation of the business model and the continuous maturity of food prefabrication and central kitchen have improved the quality requirements of the catering industry for the supply of upstream foodstuffs. Leading aquatic enterprises with multi-dimensional advantages such as raw material sources, processing technology, quality control and management are expected to continue to benefit.
Profit forecast, valuation and investment rating
Taking into account the in-depth promotion and further improvement of the company's industrial chain and global layout, we expect the company to achieve an income of 54.17pm in 2019-2021, a net profit of RMB 1.65pm, a net profit of RMB 2.35 / 320 million, and an EPS0.18/0.26/0.35 yuan, corresponding to PE times of 20-14-10, covering for the first time and giving a "recommended" rating.
Risk tips: raw material prices fluctuate, supply chain integration does not meet expectations, and terminal demand does not meet expectations.
