Laying out the fishery prepared food business has great potential for long-term development, maintaining the “increase in holdings” rating of the League of Nations Fisheries 2022/Q4 with revenue of 1.17 billion yuan, down 0.8% from the previous year; the net profit of the mother was 60 million yuan. 2023Q1 revenue was 1.42 billion yuan, up 33.2% year on year; Guimu's net profit was 0.1 billion yuan, up 10% year on year. Due to fierce competition in the prepared food industry, we lowered the company's 2023-2024 profit forecast. The estimated net profit for 2023-2024 was 104 million and 199 million yuan respectively (the previous time was 156 and 263 million yuan), and added the 2025 profit forecast of 298 million yuan; EPS was 0.09, 0.18, and 0.26 yuan respectively. The current stock price corresponding to PE is 56.2, 29.4, 19.6 times. The company has divested the aquaculture business, focusing on high-profit food processing operations such as prepared fishery vegetables. The B and C sides have a two-pronged approach and an omni-channel layout. In the future, as production capacity continues to be released and channels are further improved, the company has great potential for development, and we will maintain our “increase holdings” rating.

The prepared food business is developing rapidly, and revenue is growing steadily

Specifically: (1) By product: Aquatic food, feed, and others in 2022 were +18.97%, -35.36%, and -18.77%, respectively. In 2022, the company focused on developing the prepared food business, with a year-on-year increase of 34.48% in revenue to 1,131 billion yuan. (2) Looking at the subregion: domestic and foreign countries increased 10.32% and 18.28% respectively in 2022. Looking ahead to 2023, the company adopts a large single product strategy and an omni-channel layout. The B and C sides work together, the B side cooperates with the top 100 catering companies, and the C side lays out supermarkets and e-commerce channels. It is expected that the prepared food business will still grow rapidly.

The decline in net interest rate to the mother was mainly due to a decline in gross margin

The net interest rate returned to the mother of 2023Q1 fell 0.2 pct year over year, mainly due to a year-on-year decline of 1.9 pct to 10.3% in gross margin. The 2023Q1 sales expenses rate fell 0.5pct to 3.5% year on year; the management expenses rate fell 0.7pct to 2.5% year on year. Looking ahead to 2023, the company's prepared food business is still in the development and promotion period, and it is expected that the rates will remain high.

Focus on fishery prepared food business, omni-channel layout

Guolian Fisheries focuses on high-margin prepared food business, with an omni-channel layout, and great potential for development: (1) In terms of products, the company launched more than 20 new prepared dishes, such as minced red mackerel, seasoned bullfrog, and grilled fish with pineapple, and will continue to promote them in the future to create large products; (2) Omnichannel layout, develop channels such as catering customers, and carry out product research and development around major catering customers to enhance market awareness and enhance service capabilities.

Risk warning: production capacity investment falls short of expectations, market expansion falls short of expectations, risk of fluctuations in raw material prices, etc.