Performance summary: The company released its report for the third quarter of 2024. In the first three quarters, the company achieved operating income of 3.249 billion yuan, +16.82% year-on-year, net profit to mother of 0.016 billion yuan, +26.57% year-on-year, after deducting non-return net profit of 0.011 billion yuan, or +176.98% year-on-year. In 2024Q3, revenue was 1.293 billion yuan, +49.94% year over year, net profit to mother was -0.054 billion yuan, +57.32% year over year, and net profit after deducting non-return to mother was -0.058 billion yuan, or -0.72% year over year.

Comment: The fishing business is progressing steadily, and 2024Q3 performance fluctuates. The main reason for the year-on-year change in the company's profit was that the fishery market environment was complex and varied during the reporting period, fluctuations in aquatic product prices, and fishing costs were affected by various factors. The company's overall performance increased in the first three quarters of 2024, but there was a single quarter loss in the third quarter. At the same time, the company also has certain changes and fluctuations in financial indicators, expenses, etc. The company's gross margin for the third quarter was 3.23%, up 0.81 pp year on year; net margin was -4.3%, down 5.14 pp year on year. Expenses during the reporting period were 0.299 billion, sales expenses +78.02% YoY, R&D expenses +270.3% YoY, and financial expenses +149.15% YoY.

The company is an important pelagic fishery enterprise in China, with strong resource integration capabilities. The company's fishing revenue in the first half of the year was 0.647 billion yuan, and the cost reached 0.651 billion yuan. The fishing business was in a state of loss, and the gross margin was -0.7%. The main reason for the decline in semi-annual profit in 2024 was an increase in fishery sector restructuring bank merger and acquisition loans in the second half of 2023, which led to an increase in interest payments. This factor has a big impact on the company's profitability. The company also achieved a certain increase in revenue in the first half of 2024. The company's R&D investment has increased, technological innovation and management optimization have improved fishing efficiency and product quality, and fishing business efficiency is expected to improve in 2024.

The restructuring broadened the product line, and the synergy effect led to both revenue and profit growth. After the company completed the restructuring of the fishery sector at the end of June 2023, on the one hand, it deeply integrated various types of pelagic aquatic product fishing fleets within the China Agricultural Development Group system, and on the other hand, added marine services, aquatic products processing, and trade services. After the company completed the restructuring, the original project achieved information sharing and complementary advantages in various aspects such as fishery resources, production management, crew management, marketing sales, ship repair, and material procurement, and synergy effects and economies of scale are gradually showing. The company's overall level of control has improved markedly.

The industrial chain is expanding actively, and the potential for accumulation and weak development is showing. The company continues to expand and broaden the industrial chain, which has significantly enhanced its voice and influence within the industry. In the first half of 2024, the company's fishery products trade revenue reached 0.638 billion yuan, an increase of 174.56% over the previous year; retail and processing trade accounted for 32.62% of the business share. The scale of the trade business is expected to expand further in the second half of the year. With the improvement of the industrial chain and market expansion, the company's comprehensive competitiveness will continue to increase.

Profit forecasting and investment advice. EPS is expected to be 0.23 yuan, 0.37 yuan, and 0.55 yuan respectively in 2024-2026, and the corresponding dynamic PE is 34/ 21/14 times, respectively. Covered for the first time, giving a “holding” rating.

Risk warning: risk of aquatic product price fluctuations; risk of rising fishing and feed costs; risk of resource changes and marine environmental disasters; risk of consumer demand falling short of expectations.