Introduction to this report:

In 2021, the company will expand customer service-oriented precision marketing while expanding C-end supermarkets and e-commerce channels. It is expected that the transformation of deep-processed food will be successfully realized, and its performance is expected to usher in an upward inflection point.

Key points of investment:

Maintain the increase in holdings. Due to the company's downstream expansion and continuous cost investment, we lowered the company's 2021 EPS to 0.09 yuan/share (-0.2). We expect the EPS for 2022-2023 to be 0.1 yuan or 0.13 yuan. We gave the company an average of 70 times PE for the 2021 food processing industry, maintaining the target price of 6.3 yuan/share, and maintaining the increase in holdings.

The company released its 2021 quarterly report, and the performance fell short of expectations. During the reporting period, the company achieved total operating income of 1.09 billion yuan, an increase of 15.14% over the same period last year, and achieved net profit attributable to shareholders of listed companies of 4.495 million yuan, a decrease of 52.19% over the same period last year.

Fresh e-commerce is advancing at an accelerated pace, and companies are expected to benefit from industry dividends. We expect China to become the largest aquaculture protein consumer market in the next ten years, and China's overall fishery consumption demand is expected to be close to 70 million tons in 2023. Moreover, in the post-pandemic era, fresh e-commerce platforms are developing rapidly, and fresh e-commerce is attacking deep-water fishery areas; furthermore, consumers have further knowledge about prepared dishes, and the prepared vegetable market is expected to continue to grow rapidly after the epidemic. As a domestic fresh prawn food supplier, the company is expected to fully benefit from the industry dividends brought by fresh e-commerce.

Multi-channel development of the company's sales. In 2021, the company focused on service-oriented marketing and precision marketing for major customers, sank the team down to first-line catering channels, and achieved full process support for customer R&D, procurement, production and sales. In terms of expanding the C-terminal supermarket channel, the company adopted a differentiated position. In terms of new e-commerce retail channels, online cultivation and offline experience activities have been carried out to raise brand awareness and create popular products. We believe that the company is expected to fully benefit from industry dividends, combine its own competitive advantages, and achieve transformation.

Risk warning: the spread of COVID-19, food quality and safety.