Report summary
Multiple factors affected 23-year results and reversed losses month-on-month in Q1
In '23, the company achieved operating income of about 6.998 billion yuan, a year-on-year decrease of 0.14%; realized net profit to mother of 188 million yuan, a year-on-year decrease of 243.94%; realized deducted non-net profit of 147 million yuan, a year-on-year decrease of 226.51%. The decline in the company's performance was mainly affected by several factors: 1) The rise in the price of feed raw materials (according to iFind, the national average price of imported fish meal rose 23.0% year on year 23), reducing feed business profits (the company's gross profit margin for specialty water feed was 13.98% in '23, down 1.37 pcts year on year). 2) The fish came out less than expected. Affected by factors such as climate change, farming intensity, and market conditions, the company's pace was adjusted in '23. About 3,461 tons were harvested throughout the year, a year-on-year decrease of about 43.28%. 3) As industrial construction progresses, costs have increased. Sales, finance, and equity incentive expenses increased by about 21 million yuan, 63 million yuan, and 40 million yuan, respectively, over the same period last year. In '24, Q1's operations recovered markedly. Q1 achieved net profit of 6.59 million yuan to mother and 4.851 million yuan after deducting non-net profit, reversing losses from quarter to quarter. Q1 Company's fishless main business achieved a year-on-month increase in sales volume.
The cycle is expected to improve, and the long-term logic of fish farming will not change
1) In the short to medium term, the cycle is expected to improve, and mackerel leaving the pond will recover. In the feed business, the price of fishmeal, an important ingredient in aquatic feed, has returned significantly (according to ifind, the national average price of imported fishmeal in stock up to April 29 was 12.0% lower than the average price in 23). Furthermore, the market for corn and soybeans, the main ingredient in the company's livestock and poultry feed, has also returned significantly, which will drive the company's overall feed business profitability to recover. In terms of fish business, aquaculture will recover out of the pond. The construction of the company's two major fishless 10,000-mu industrial bases has basically been completed and is in normal operation. The bases in Fujian, Guangdong, Jiangxi, Hubei, and Guangxi continue to release fish. Fish production is expected to reach more than 5,000 tons in 24Q2, and the number of fish produced throughout the year can reach more than 15,000 tons. 2) In the long run, the long-term logic of mackerel farming remains unchanged. On the supply side, due to the growth characteristics of Myanmar, seedlings rely on natural fishing, and the total quantity is limited. In recent years, global annual production of anchovies has stabilized at around 200,000 tons. On the demand side, mackerel consumption is expected to increase in trend as living standards improve and mackerel dishes are promoted. Currently, the average price of Japanese rice (3P) in Japan is 105.0 yuan/kg, which is in the 17.6% fraction of the 10-year price fluctuation range. With the recovery of the macroeconomy and consumption, it is expected that there will be better market performance.
Investment advice
Tianma Technology is a large-scale modern fishery and animal husbandry group enterprise integrating specialty aquatic products, animal husbandry, and food, integrating one, two, and three industries. The company's main business cycle is improving, the fish farming strategy is advancing, and the long-term logic remains unchanged. We expect the company's net profit to be RMB 302 million, RMB 521 million, and RMB 731 million respectively. EPS will be 0.66 yuan, 1.14 yuan, and 1.60 yuan respectively. Corresponding to 2024-2026 PE will be 22.37, 12.95, and 9.25 times, respectively, maintaining the rating and giving a “buy” rating.
Risk warning
Risks such as fluctuations in the livestock and poultry industry cycle, and the expansion of fish farming production falling short of expectations.