Event: the company released major operating data for the third quarter of 2018.
Comments:
The company released operating data for the third quarter of 2018:
1) Frozen prepared food (revenue of 421 million yuan in 2018, accounting for 34.88%, gross profit 2.99%): output in the first three quarters of 2017 was 16500 tons, down 1.17% from the same period last year, sales were 16600 tons, down 1.10% from the same period last year, and inventory was 1090.31 tons, an increase of 2.75%. 2018 the output in the third quarter of 2018 was 5932.84 tons, down 4.68 percent from the same period last year, and the sales volume was 6110.74 tons, down 8.25 percent. The company's frozen food production and sales continued to decline in the third quarter, but the year-on-year decline and the profits of the business accounted for relatively small, which had little impact on the company's full-year performance. We expect the company's frozen food business to grow steadily.
2) fishing products (revenue of 184 million yuan in 2017, accounting for 15.25%, gross profit 25.94%): output in the first three quarters of 2018 was 64500 tons, an increase of 27.61%, sales volume of 69900 tons, an increase of 14.62%, and inventory of 25200 tons, an increase of 25.02%. The output in the third quarter of 2018 was 30400 tons, a substantial increase of 168.89 percent over the same period last year, and sales volume was 29400 tons, a sharp increase of 101.21 percent over the same period last year. The company's fishing business production and sales were booming in the third quarter, and the new fishing vessels began to cash in their performances. we believe that with the rapid development of offshore fishing and the increasingly stringent management of the industry, the company's fishing business growth momentum is clear, and the market share is expected to accelerate.
3) processed sea cucumber products (revenue of 141 million yuan in 2018, accounting for 11.67%, gross profit of 17.93%): output in the first three quarters of 2017 was 178.91 tons, down 44.58% from the same period last year, and sales volume was 263.54 tons, an increase of 12.05% over the same period last year. Inventory decreased by 73.24%. In the third quarter of 2018, the output was 31.71 tons, down 83.60 percent from the same period last year, and the sales volume was 164.98 tons, an increase of 134.98 percent over the same period last year. The company's sales of processed sea cucumbers increased significantly in the third quarter, which is mainly related to the changes in the sea cucumber market this year. The reduction in production of sea cucumbers in Liaoning this summer led to a tightening of supply in the industry. Driven by the replenishment demand of downstream sea cucumber processing enterprises in the third quarter, the company's semi-finished sea cucumbers (sea cucumbers after the initial processing of fresh sea cucumbers) sales increased significantly.
4) fresh sea cucumbers (revenue of 319 million yuan in 2017, accounting for 26.41%, gross profit of 48%): the third quarter is the summer dormant season of sea cucumbers, and the company's production and sales of fresh sea cucumbers are 0. The sea area of sea cucumber culture in the company's cofferdam is relatively deep, which is basically not affected by the high temperature this year. We expect that autumn cucumber fishing will be carried out normally in the fourth quarter, and the price will be booming due to the gap between production and demand in the industry. The company's fresh sea cucumber business will fully benefit, and is expected to achieve a simultaneous increase in volume and profit.
Earnings forecast and rating: we expect diluted earnings per share for 18-20 years to be 0.06 yuan, 0.08 yuan and 0.11 yuan respectively. Maintain the "overweight" rating of the company.
Risk factors: uncertain risks in the implementation of the holding increase plan, extreme weather risk, product price fluctuation risk, scale expansion less than expected, channel expansion less than expected, policy change risk and so on.
