On August 29, 2024, the League of Nations Fisheries released its 2024 semi-annual report.

Key points of investment

Revenue performance was under pressure, and profit turned loss into profit

The company's 2024H1 revenue was 2.022 billion yuan (25% decrease), net profit attributable to mother was 0.018 billion yuan (-0.186 billion yuan for the same period in 2023), and net profit not attributable to mother was 0.002 billion yuan (-0.192 billion yuan for the same period in 2023). 2024Q2's revenue was 0.979 billion yuan (same decrease of 24%), net profit due to mother was 0.014 billion yuan (-0.197 billion yuan for the same period in 2023), and net profit after deducting non-return to mother was 0.009 billion yuan (-0.198 billion yuan for the same period in 2023), turning a loss into a profit. On the profit side, the company's 2024H1 gross margin increased by 3 pct to 13.60%, mainly due to the company's continuous optimization of all aspects of the supply chain and expansion of high-value-added product business. The sales/management expenses ratio increased by 0.2 pct/0.4 pct to 4.28%/2.86% respectively. Combined with reduced asset impairment losses, the 2024H1 net margin also increased by 7 pct to 0.65%. As the fishery industry recovers and product structure is optimized, the company's profitability is expected to continue to rise.

Demand for aquatic food is weak, and the overseas business structure continues to be optimized

By product, 2024H1's revenue in the aquatic food industry was 1.942 billion yuan (same decrease of 25%), and gross margin increased by 3 pcts to 14.16%, of which pre-prepared food revenue was 0.605 billion yuan (same decrease of 10%), increasing the share of high-margin prepared food business revenue, boosting the gross margin performance of the aquatic products business. The company plans to continue to work around breaking the situation with large single product strategies to initially build a core factory product echelon. As production capacity utilization increases, product quality will steadily improve. 2024Q2's feed industry revenue is 0.067 billion yuan (same decrease of 32%). By channel, the company's catering and customer channels are developing steadily. At the same time, the distribution channel is sinking, and business personnel are providing key assistance to customers. It is expected that the development of new customers will contribute additional volume to the company. By region, 2024H1's domestic revenue was 0.895 billion yuan (same decrease of 34%), and foreign revenue was 1.127 billion yuan (same decrease of 16%). The company continued to push forward the business reform of the US SSC company, optimized the business structure, and turned losses into profits. Non-US international businesses actively connected with overseas customers, and sales in the Canadian and Latin American markets increased dramatically.

Profit forecasting

The company's fishery food sector was affected by market conditions, and the company used fishery collaboration advantages to upgrade its business model. Some large single products showed a clear trend in volume. Under pressure from the main business, the high-margin prepared dishes sector contributed a new driving force for performance. As the company deepens its advantages in catering channels and opens up overseas markets, performance is expected to rise steadily. According to the semi-annual report, we adjusted the 2024-2026 EPS to 0.03/0.04/0.08 (previous value was 0.02/0.08/0.11) yuan, respectively. 109/66/35 times, maintaining a “buy” investment rating.

Risk warning

Macroeconomic downside risks, increased market competition risks, prepared dishes falling short of expectations, risk of rising raw material prices, etc.