Event

The company disclosed that its revenue in the first three quarters of 2022 was 5.312 billion yuan, an increase of 32.80 percent over the same period last year, and its net profit was 241 million yuan, an increase of 187.26 percent over the same period last year. 2022Q3 realized revenue of 2.001 billion yuan, an increase of 27.46% over the same period last year, an increase of 8.60% over the previous year, and a net profit of 90.8081 million yuan, an increase of 293.92% over the same period last year, down 18.80% from the previous year.

Brief comment

1. Revenue continued to grow in the third quarter, while profits declined month-on-month.

In the first three quarters of 2022, the company achieved revenue of 5.312 billion yuan (year-on-year + 32.80%) and net profit of 241 million yuan (year-on-year + 187.26%), of which special water feed contributed profit of about 83 million yuan, livestock and poultry feed contribution profit of about 25 million yuan, breeding business contribution profit of about 150 million yuan, and food business loss of about 20 million yuan. The company's 2022Q3 realized revenue of 2.001 billion yuan (year-on-year + 27.46%, month-on-month + 8.60%) and net profit of 90.8081 million yuan (year-on-year + 293.92%, month-on-month-18.80%).

The company's 2022Q3 sales gross profit margin is 12.10% (year-on-year + 2.83pcts, month-on-1.29pcts), and net sales profit margin is 4.93% (year-on-year + 2.83pcts, month-on-1.81pcts). The month-on-month decline in profit margin is mainly due to the increase in feed raw material prices, a slight decline in eel prices and other factors leading to a slight pressure on the profit margin of the company's eel farming and feed business.

The company's 2022Q3 sales expenses are 15.5503 million yuan (year-on-year-4.11%, month-on-month + 3.42%), management expenses are 51.5852 million yuan (year-on-year + 58.66%, month-on-month + 62.56%), R & D expenses are 32.7127 million yuan (year-on-year + 21.37%, month-on-month + 0.30%), and financial expenses are 25.9265 million yuan (year-on-year + 204.50%, month-on-month + 29.87%). The significant increase is mainly due to the increase in borrowing due to the expansion of business scale. Resulting in an increase in net interest expenditure In addition, the exchange rate of RMB against US dollars rose in the current period, and the company's net exchange losses on foreign currency accounts payable, foreign currency loans and accounts receivable increased compared with the same period.

2. The eel business is growing steadily, and the future performance is worth looking forward to.

In the first three quarters of 2022, the company achieved sales revenue of 494 million yuan and sales of 5819.35 tons; 22Q3 sales of about 2428.50 tons (month-on-month-2.88%), down from the second quarter or due to post-holiday demand for Japanese eel. The eel price of the company in the third quarter was about 80,000 yuan per ton. affected by the rise in the price of feed raw materials and the slight drop in eel prices, the gross profit margin of the company's eel farming business was about 41%, a slight decline. Looking ahead, the company is expected to successfully achieve its target of 8000 tons of fish this year, while the peak consumption season before the Spring Festival is approaching, which is expected to boost eel prices, and the company's eel farming business is expected to rise in volume and price.

In the first three quarters of 2022, the company's aquatic product sales revenue was 218 million yuan (year-on-year + 5.22%), food (roast eel) sales 1259.40 tons (year-on-year-22.56%), 2022Q3 sales 248.30 tons. The decline in the company's food business sales in the first three quarters is mainly due to part of the company's production capacity and orders affected by the rectification of the production line. At present, the annual production capacity of the company's food business is 4500 tons, and the low capacity utilization leads to a slight loss in this sector. in the future, with the improvement of capacity utilization, the company's food business is expected to increase in volume and profit.

3. Feed sales continue to grow, and gross profit margin is slightly under pressure.

In the first three quarters of 2022, the company realized feed sales income of 2.234 billion yuan (year-on-year + 23.91%), of which special water feed sales revenue was 1.434 billion yuan (year-on-year + 19.07%) and livestock and poultry feed sales income was 3.034 billion yuan (year-on-year + 26.33%). In terms of sales volume, the company sold 155400 tons of special water feed (+ 21.25%), 64900 tons of 2022Q3 (+ 6.51%), 901400 tons of livestock and poultry feed (+ 16.82%) and 324600 tons of 2022Q3 (+ 17.28%) in the first three quarters. Affected by the rise in raw material prices, we expect the company's feed business gross margin to be slightly under pressure.

4. Eel business is expected to continue to improve, and feed business is expected to improve marginally.

Due to the less impact of the eel seedlings in this season, the overall supply of the industry is expected to decline next year, and the superimposed demand is gradually improving. We are optimistic about the eel price boom next year. The company will continue to invest in this round of fry season and is expected to guarantee the emergence of 15-20, 000 tons of fish next year. Taking all things into consideration, we expect that the company's eel business is expected to achieve a rise in volume, price and profit next year. Downstream aquaculture continues to make profits, the enthusiasm of the industry to fill the column has been restored to drive the improvement of feed demand, we expect the company's feed business to maintain a steady development.

5, profit forecast and rating: the company is expected to achieve revenue of 75.97 million yuan in 2022-2024, net profit of 3.74 billion yuan, 1.74 billion yuan, 2.48 yuan for EPS and 21.5x/10.6x/7.4x for PE, maintaining the "buy" rating.

Risk hints: feed raw material price fluctuation risk, eel fry catch and seedling quantity less than expected risk, eel price drop risk, project construction less than expected risk, impact of natural disasters and epidemic disease on eel culture, etc.