(Report Producer/Analyst: Northeast Securities Wang Wei)
1. The world's leading salmon industry, profit performance rebounded rapidly
1.1. Mergers and acquisitions cut into the 100 billion scarce seafood track, and the whole industry chain of salmon is operated
Joyvo Foods is mainly engaged in the processing, sales, import and export trade of high-end animal protein such as aquatic products, as well as the channel operation of beef and mutton and its by-products.
The company completed the acquisition of Qingdao Guoxing Co., Ltd. in 2017 to enter the aquatic business, and successfully acquired the Chilean salmon farming enterprise Australis Seafoods S.A. in 2019, further increasing the company's business layout, and now the salmon business has become the company's main source of revenue.
The company adheres to the development concept of healthy Chinese people, grasps the general trend of consumption upgrading, focuses on the field of high-end animal protein represented by imported seafood, adheres to the strategic route of "global resources + Chinese consumption", and is committed to becoming an international enterprise in the high-end animal protein industry.
The company's product matrix is rich.
The company's sales products are mainly salmon, Arctic sweet shrimp, narrow cod, real cod, flounder and other high-quality seafood and based on the above high-quality seafood launched healthy nutrition 3R prepared dish series products.
Salmon, which is dominated by Atlantic salmon, is the company's core product, and its product forms include whole fish, fillet, fish segments, and salmon fresh pine and other deep-processed products.
The company's salmon is cultured and raised through its Chilean subsidiary Australis, which is sold to major markets worldwide; Other seafood such as Arctic sweet shrimp and narrow cod are purchased from overseas suppliers and large fishing fleets, and further sold through slitting, processing, etc. to form different forms of products.
The whole industry chain operates the core products of salmon.
The salmon production model mainly includes three stages:
1) Freshwater nursery stage.
Subsidiary Australis imports salmon eggs from Aquagen, a world-class breeding company, and then carries out preliminary work such as hatching and seedlings to help salmon develop healthily and adapt to the marine environment in the early stage, which lasts for 10-16 months;
2) Marine aquaculture stage.
After successful early breeding of seedlings, they will be transferred from land to marine culture bases for culture, and the company implements comprehensive monitoring and management, this stage usually lasts for 14-22 months until the salmon fry grows to the required weight for commercialization (average 3-6 kg);
3) Harvesting processing stage.
After the salmon is mature, it will be caught alive and transferred to a processing plant for slaughtering, freezing and other processing procedures to become a finished product.
Legend Holdings is the actual controller of the company, and the business operation framework is clear.
Legend Holdings is the controlling shareholder of the Company, holding 67.84% of the Company's shares through the Joyvo Group. In terms of subsidiaries, the company has a number of holding subsidiaries at home and abroad to carry out different business operations, and the Chilean subsidiary Australis is one of the top ten salmon farming enterprises in the world, responsible for the whole industry operation of the company's salmon business; Qingdao Guoxing is mainly engaged in the processing and sales of Arctic sweet shrimp, narrow cod and other seafood products, is China's largest Arctic sweet shrimp import distributor, and maintains an industry leading position in the field of narrow cod processing; Wo Zhixian is responsible for the wholesale business of the company's beef and mutton and its by-products.
Joyvo Group is a wholly-owned subsidiary of Legend Holdings' Modern Agriculture Segment, mainly engaged in investment and related business operations in the fields of modern agriculture and food. Joyvo Group has a number of segments such as fruit business, protein 3R business, smart group meal, innovation business, etc., and the company is the core enterprise of protein 3R business segment.
1.2. Revenue scale is rapidly expanding and profitability is increasing
The scale of revenue has expanded rapidly, and the net profit has continued to improve.
The company completed the layout of the seafood business through the acquisition of Guoxing shares and Australis, realized the transformation and development of the business, and the company's revenue scale also achieved rapid expansion, with an average annual compound growth rate of 68.2% in the company's revenue since 2017.
On the other hand, the expenses brought by the acquisition have squeezed the company's profit side, in 2019, the company successfully acquired Australis Seafoods, the net profit of the same year turned into a loss under the higher financial expenses, in 2020, affected by the global epidemic, the market demand for salmon and other seafood weakened, the market price fell sharply, the cost of superimposed transportation and other costs rose, and the company's net profit attributable to the mother expanded to -710 million yuan; in 2021, the net profit attributable to the mother was significantly reduced by 424 million yuan compared with the same period of the previous year, and the loss was reduced to 289 million yuan.
With the slowdown of the global epidemic impact, the gradual recovery of trade and catering, and the rapid rise in salmon prices, the company's performance rebounded, and the company achieved a net profit attributable to the mother of 110 million yuan in the first quarter of 2022, turning from a loss to a profit.
Salmon revenue accounted for 69.2%, and the sales scope covered globally.
Salmon is the company's main sales products, revenue accounted for 69.2% of the company's total revenue, in 2021 to achieve revenue of 3.18 billion yuan, +2.9% year-on-year, mainly driven by rising prices; From the perspective of sales area, salmon sales coverage covers the world, of which sales in the Americas accounted for 61.7%, Europe and Asia-Pacific accounted for 20.7/17.7% respectively.
Revenue from other seafood products such as narrow cod and arctic sweet shrimp was 760 million yuan, down 11.1% year-on-year, mainly due to the sharp decline in sales due to the shortage of overseas raw materials and import and export logistics restrictions.
Mergers and acquisitions increase the company's financial expenses in the short term.
The company's acquisition of overseas subsidiaries has led to an increase in liabilities, and the company's financial expenses are at a high level in the short term, with financial expenses increasing by 4.4pct/2.3pct to 6.8%/9.1% in 2019/2020, respectively. With the decline of the company's future asset-liability ratio, the company's financial expense ratio is expected to continue to decline. Gross profit/net interest rate shows a similar V-shaped trend.
In terms of profitability, in 2020, under the impact of the epidemic conflict and the increase in financial expenditure, the net profit margin reached the lowest level (-15.8%), with the easing of the impact of the global epidemic on trade, catering and other aspects, the salmon market demand side gradually recovered, the company's overall profitability continued to repair, and the gross profit margin in 2021 increased by 12.3pct to 6.1% year-on-year. Salmon prices continued their growth momentum in the first quarter of 2022, with gross/net margin both hitting new highs in recent years. (Source: Visionary Think Tank)
2. The barriers of the 100 billion track are high, and the price is supported by the long-term demand gap
2.1. Salmon has a high nutritional value and a high degree of industrialization in the industry
Salmon is a general term for some species of salmonids, mainly including Atlantic salmon, trout, silver salmon, king salmon, whitefish and other species, while other species in the salmon family are called trout (such as brown trout, golden trout, etc.). Atlantic salmon is the most important salmon species, widely used downstream, and can be used to make smoked salmon, sashimi, sushi and other products Norway and Chile are important breeding areas. Other salmon species are produced in smaller quantities, mainly suitable for specific consumption methods and the consumer market is concentrated in some countries and regions, such as silver salmon is mainly used to make pickled products, and most of its consumer demand comes from Japan.
Salmon is mainly farmed in captivity, with Atlantic salmon harvested at 76 percent.
The supply of salmon is mainly from artificial farms, and the number of wild-caught fish is relatively small, which has been stable at 500 to 1 million tonnes in the past decade, accounting for only 18.0% of the total supply of salmon in 2020. Since the supply of salmon wild fish is limited by the decline of marine fishery resources and quotas, the future growth of their harvest is also relatively limited.
From the perspective of specific species, Atlantic salmon is the most mainstream salmon species on the market, and it is basically obtained through artificial farming, and its harvest in 2020 accounts for 75.5% of the total salmon harvest.
The nutritional value of salmon is at the forefront of seafood.
Salmon is rich in Omega-3, 18 kinds of amino acids (including 8 kinds of essential amino acids), vitamins and iron, calcium, zinc, selenium and other trace elements, can promote brain development, enhance memory, improve the body's immunity, prevent cardiovascular disease, anti-aging, anti-tumor, prevent vision decline, high nutritional value.
Referring to data from the U.S. Food and Drug Administration (FDA), salmon, which is dominated by Atlantic salmon, ranks high among the major seafood products in a number of nutritional indicators, and its comprehensive nutritional value ranks among the top.
Salmon farming is highly industrialized and has a low risk of farming.
The global salmon breeding industry basically produces through large-scale and intensive mode, and has formed a mature and stable, intelligent and fine breeding system in the industry, implements information monitoring in the whole process of freshwater seedling breeding, marine aquaculture and harvesting and processing, and relies on advanced information systems to achieve a scientific feeding management system of salmon eating less and more meals, accurate feeding, and full visualization; In terms of epidemic prevention and control, the competent departments of the industry have set up a set of efficient control models to achieve efficient prevention and control of epidemic diseases, and the systemic risks of the industry as a whole can be controlled; In addition, the carbon emissions and freshwater consumption corresponding to the production of salmon per unit weight are lower than other protein products such as pigs, cattle and chickens, so the salmon breeding industry has the advantages of low-carbon environmental protection and sustainable development.
2.2. Supply side: high barriers, limited expansion, high concentration
2.2.1. The supply of products is concentrated and global trade is active
Salmon production is concentrated in Norway and Chile, and global trade is active. The global salmon supply has grown steadily, with a CAGR of 6.4% in 2010 and a global harvest of 2.584 million tonnes in 2021, with norway and Chile contributing 53.3% and 24.5% of the global atlantic salmon supply respectively, while the atlantic salmon market is mainly concentrated in North America, EU countries and Asia.
According to the Salmon Farming Industry Report 2021, North American, EU and Asian Atlantic salmon harvests accounted for only 25%, 16% and 0% of their market demand in 2020, respectively. It can be seen that the global production and marketing of Atlantic salmon are obviously separated, so trade is active and it is also susceptible to the fluctuations of the global epidemic. Due to transportation costs and other factors, Norwegian Atlantic salmon is mainly exported to Europe and Asia, while Chilean products are mainly supplied to the United States, South America and Asia.
2.2.2. The barrier to entry is high and production expansion is limited
Only a few countries and regions worldwide are suitable for salmon farming. Salmon farming has higher requirements for the natural environment, first of all, the growth water quality requires clear and pure, and the dissolved oxygen content, seawater PH value and other indicators have certain restrictions; Followed by water temperature requirements, Atlantic salmon is a cold-blooded animal, water temperature will affect its growth rate, the most favorable breeding water temperature for salmon growth should be maintained at 8-14 degrees Celsius, currently only the earth's northern and southern hemispheres within a specific high latitude range of water temperatures suitable for salmon farming;
In addition, optimal salmon culture waters require a certain degree of seawater flow to allow them to move freely, so suitable culture areas are usually in waters protected by archipelagos and fjords. Globally, the salmon farming area is only suitable for the seas of 10 countries and regions, including Norway, Chile and Scotland.
Salmon farming requires a licence and production expansion is severely restricted.
For reasons of the natural environment and marine ecosystems, salmon farming is regulated by the government and only enterprises that have obtained a farming license can carry out aquaculture in the corresponding sea areas. In recent years, due to the continuous expansion of the salmon farming industry, the bearing pressure of the water environment has increased, and major producing countries such as Norway and Chile have strengthened control, restricting the expansion of existing farms and the entry of new players, thus also controlling the growth of salmon production in the global industry.
1) Norway: Restrict the issuance of salmon farming licenses and set an upper limit on the production volume of the aquaculture area.
Norway began restricting the issuance of salmon farming licences in 1982, issuing new licences only in specific years, and the number of Atlantic salmon and trout aquaculture licences increased by less than 10% overall in the decade 2011-2020.
Each licence corresponds to a maximum allowed biomass or MAB, i.e. a maximum amount of salmon to be farmed in the sea – typically a licence corresponds to 780 tonnes (live fish weight), so the company's maximum stock depends on the sum of the MABs corresponding to the licences held.
In addition to the number of licences, Norway also imposes a limit on the amount of salmon culture per culture area, that is, a MAB is set up in each farming area, and the corresponding MAB in all farming areas is adjusted according to the level of its sea lice population every year, and the adjustment is divided into three cases: an increase of 6%, a decrease of 6% and a constant. The average annual production per license in Norway in 2020 is 1021 tonnes (destained weight).
2) Chile: Aquaculture regions have suspended license applications, and the expansion of farms may be restricted in the future.
Chilean salmon farming is under full government regulation. The Chilean government's supervision covers all aspects of aquaculture license application, freshwater seedling breeding, marine aquaculture and harvesting and processing. Chile's National Fisheries and Aquaculture Administration (Sernapesca), the Navy, the Ministry of Labor and other government departments are involved in the supervision of different aspects of salmon farming. Chilean salmon farming has a well-established industry code and farmers are required to comply with a series of laws and regulations. The application process for a salmon farming license in Chile is long and the qualification review is strict.
The steps in the licence application process include:
1) apply to Sernapesca;
2) Submit an application for environmental impact assessment to the State Environmental Supervision Administration and obtain an environmental classification resolution (lasting about 1 year);
3) jointly assessed and issued by Sernapesca and the State Agency for Environmental Supervision and the issuance of a resolution on the aquaculture plan;
4) The Ministry of Defense approves the right to use the waters (lasts at least 3 years);
5) The Government Department of Internal Control confirms the decision of the Ministry of Defense;
6) The Ministry of National Defense finally permits and issues breeding licenses, granting the right to use the designated latitude and longitude waters.
Applications for licences have been suspended in areas where salmon farming is concentrated, and future industry expansion may be further restricted. Chile has suspended the issuance of new aquaculture licences in Zones X, XI and XII, where salmon farming is concentrated, and the President of Chile said in May that the Chilean government was working on a bill that would limit the expansion of salmon farms and prohibit the development of salmon farming in marine protected areas. In the future, it will be more difficult for the salmon farming industry to obtain new breeding licenses, and the overall scale of aquaculture will not be greatly expanded.
2.2.3. The industry is constantly consolidating, and the share is concentrated
The concentration of the industry continues to increase, and the head enterprises occupy the right to speak in the industry. In the past two decades, the major salmon-producing areas have experienced industry consolidation, showing a trend of rapid decline in the number of participating companies and the concentration of market share to the head.
According to the Salmon Farming Industry Report 2021, the number of companies accounting for 80% of salmon and sturgeon production in the major salmon producing countries is decreasing, with 23 and 10 companies accounting for 80% of the market share in Norway and Chile in 2020, respectively, only about one-third of what was in 1997.
The proportion of output of head enterprises continues to increase, firmly occupying the right to speak in the industry, of which the Atlantic salmon industry cr4 in Norway and Chile is more than 50%, while other regions have been occupied by several companies to occupy the vast majority of the market share, of which CR4 in North America and the United Kingdom is as high as 97.1% and 85.8%.
With the tightening of restrictions on the issuance of licenses and the strengthening of industry supervision, the head enterprises will maintain their industry status for a long time in the future. The company's subsidiary Australis is one of the top ten salmon companies in the world and is among the best companies in its chilean industry, with 8.5% of Chile's total production in 2021.
2.3. Demand side: Europe and the United States account for more than 70%, and the Chinese market needs to be developed urgently
Atlantic salmon consumption in 2021 was 2.591 million tonnes, with the EU and the US accounting for a total of 66.7%. Demand for Atlantic salmon has grown steadily over the past decade (CARG 6.0%), and in 2021, the global demand side recovered rapidly after the epidemic, with annual demand of 2.591 million tons, +8.6% year-on-year, a growth rate of a new high in recent years.
The European Union and the United States are the main consuming regions of Atlantic salmon in the world, and together they consume two-thirds of the world's Atlantic salmon production. Specifically, the European Union (including the United Kingdom) is the largest demand area for Atlantic salmon, with consumption of 1.156 million tons in 2021, accounting for 44.6% of the total global consumption, while the remaining European countries consume a total of 114,000 tons, accounting for only 4.4%. The second largest consumption area in the United States will consume 570,000 tons in the Atlantic salmon market in 2021, accounting for 22.0%, and the consumption of other countries or regions will be relatively small.
Per capita consumption in European countries is in the forefront, and China is far below the world average.
From the perspective of per capita consumption, European countries rank high, among which the world's highest Per capita sales volume in Norway reached 8.5kg/year, which is 2-4 times that of other European countries; The world's largest atlantic salmon consumer country in the United States has a per capita consumption of 1.9kg/ year, which has some room for improvement compared with other developed countries; China, Japan and other Asian countries rank relatively low, the mainland's per capita consumption is only 0.06kg/year, far lower than other countries, while Japan's per capita consumption is 0.55kg/year, about 9 times that of the mainland.
China is the emerging market for salmon in the future, and the growth potential of C-end consumption is huge.
Since 2011, the demand for Atlantic salmon on the mainland has grown rapidly, from 2011 to 2019, the compound growth rate has reached 11.9%, and the global demand growth rate in the same period has been 5.9%.
In 2020-2021, the import of seafood from the mainland affected by the epidemic was blocked, and the demand for salmon declined. As the impact of the epidemic on import and export trade gradually subsides, the growth potential of mainland salmon consumption will be released, and according to salmon research institute Kontali, it will reach 210,000 tons of salmon consumption in 2030, compared with about 130,000 tons of growth space in 2021.
Unlike Europe, the United States and Japan to C-end consumption (C-end consumption accounted for 72/66/65% respectively), mainland salmon consumption is mainly based on catering channels, accounting for up to 90%, C-end consumption is still in the embryonic stage, huge consumption potential needs to be developed, is expected to become a new growth point in the mainland salmon industry.
2.4. Price side: It will remain high in the short term, supported by the demand gap in the long term
The impact of the pandemic has slowed globally, and salmon prices have continued to rise in the second half of 2021. 2020 Affected by the epidemic, salmon import and export trade is blocked, the demand side is sluggish, fish prices have begun to continue to fall, according to statistics from statistics Norway, the price of Atlantic salmon fell by more than 30% throughout the year.
With the normalization of the epidemic situation around the world, the gradual and orderly recovery of catering and trade, the recovery of salmon demand side, the price of salmon began to rise from the second half of 2021, while superimposing cost-side price increases and supply-side production reduction factors, fish prices continued to strengthen since 2022, rising 41.3% by the 22nd week, and prices hit a new high in nearly a decade.
Based on the average price (59.2 Norwegian Runk/kg, or 39.7 yuan/kg) and consumption (2.591 million tons) in 2021, the global Atlantic salmon market size reached 102.97 billion yuan.
Prices will remain high in the short term, supported by a gap in demand in the long term.
1) In the short term, supply tightens, demand recovers, costs rise, and prices will remain high.
The overall salmon farming cycle is 1-2 years, and the overall seeding plan of the industry in 2020-2021 is postponed by the impact of the epidemic, so the future harvest is expected to decline. Global Atlantic salmon harvest in Q1 2022 was 592 000 tonnes, down 6.7% year-on-year, with Chile falling by 11.2%; According to Norges Bank, the global supply of salmon will grow negatively in 2022. In addition, the continuous rise in the price of feed raw materials such as corn, wheat and soybeans has also boosted prices.
2) In the long run, the expansion of aquaculture is limited, and the demand gap supports prices.
Due to the strict restrictions on the expansion of salmon farming in Norway, Chile and other countries for the sake of marine environment and ecosystems, the growth rate of salmon supply will tend to be flat for a long time, and it is difficult to match the growth of demand side, so the long-term demand gap will promote the price center of salmon to move up. (Source: Visionary Think Tank)
3. Grasp the upstream high-quality resources and vigorously explore the domestic market
3.1. Sitting on the advantageous regional license barriers, the aquaculture technology industry is leading
The natural conditions of the breeding area are superior, and the license plate builds industry barriers.
Salmon farming requires a license, and the number of licenses of the enterprise determines the upper limit of its production. At present, the licenses of the world's major production areas are mainly in the head enterprises, and the average number of new licenses per year is small, so the industry barriers are high.
Australis, a subsidiary of the Company, has nearly 100 aquaculture licenses in Chile, mainly distributed in the 11th and 12th districts of Chile (both of which have been suspended for the time being), of which the 12th region has superior marine resource endowments and pure water quality with high oxygen content, which is the only aquaculture area in Chile that still has growth potential, and Australis has become the largest salmon enterprise in the region.
According to Seafood Watch's rating of Chile's 10th to 12th arrondissements, The Atlantic Salmon in 12th Arrondissement has the highest combined score and final rating in ten indicators, including sewage discharge, ecological environment, and use of chemicals.
The processing plant in District 12 will be completed, and the in-situ processing capacity will be further strengthened.
The company has built a sufficient network of professional processing plants at home and abroad to ensure the processing efficiency and product quality of products, and has built a high-quality salmon processing plant with an annual processing capacity of 60,000 tons in the tenth district Fitz Roy, with 13 production lines for cleaning, slicing, materials, processing and packaging of various value-added products, responsible for the processing of salmon farmed by the company in the eleventh district, and for the twelfth district, the company currently has an annual processing capacity of 40,000 tons, and the newly built processing plant Dumestre It is the first slaughterhouse in the 12th district to have a land super-relief temporary pond, with both slaughtering and deep processing capabilities, and has entered the trial operation stage in March this year, which will provide the company with an annual processing capacity of 72,000 tons in the future, and play a role in improving the efficiency of processing and transportation links and reducing the corresponding costs.
The supply of high-quality seed sources is stable, and the breeding technology industry is leading.
1) The source of high-quality seeds is stable.
The company signed a long-term agreement with AquaGen, a world-class breeding company, on the supply of salmon eggs, enabling the company's freshwater seedling breeding team to work with them for a long time and stably to ensure the supply of upstream dominant seed sources.
2) Leading breeding technology.
Subsidiary Australis in the salmon feed conversion rate, mortality control and other breeding technology indicators significantly ahead of the Chilean industry companies, feed conversion rate refers to the weight of feed required to convert a kilogram of salmon weight, the lower the indicator indicates that the higher the farming efficiency, better cost control, in 2021 the company's salmon feed conversion rate of 1.25, better than the average of the Chilean salmon farming industry 1.37. In addition, the corporate salmon mortality rate (6.4%) is also significantly lower than the industry average (15.3%).
According to Biomar's regular industry analysis report "Chile's Top 10 Salmon Farms of the Year", Australis has nine farms shortlisted in 2020 and 2021, the largest number of finalists that year.
3.2. Layout the domestic C-end and open the growth curve
Relying on the advantages of scarce high-quality seafood protein product resources in the upstream, under the upgrading trend of domestic healthy consumption, the company will make efforts to lay out the domestic C-end market in the future and open a new curve of performance growth.
Drawing on the successful experience of "Javo Blueberry", we will create the first brand of salmon terminal in China. The per capita sales of salmon in mainland China are far lower than the world average, with the rise of people's awareness of healthy eating and the development of new retail, domestic salmon, especially the C-end market, has great potential for development. At present, the vacancy of salmon brands on the market gives the company the opportunity to establish a C-end brand first-mover advantage and seize the consumer's mind.
The company will learn from the experience of the shareholder Joyvo Group in successfully building the leading brand of the blueberry industry "Joyvo Blueberry", operate through the asset-light model, and strive to build the first brand of salmon terminal in China. At present, the company has a global brand "Southring" and a retail brand "Mama Bear" in overseas markets, and has created a seafood e-commerce brand "Joyvo Fresh" and a high-nutrition children's food brand "Hungry Bear Classmate" in the domestic market.
Increase the development of channels and improve product coverage.
The company has built a diversified channel network around the world, in order to promote the development of the Chinese market, the company will take a number of initiatives in the future, and will focus on 5 sales channels:
1) Distribution end, upstream expansion of salmon resources outside Chile, downstream sales centers in various parts of China, meticulous service to the local market;
2) Retail end, to provide more competitive products for the supermarket platform that has moved in;
3) At the catering end, build a professional catering sales team to provide richer product selection;
4) Monopoly chain, build a chain store of salmon cut, which helps to face consumers more directly and enhance the brand advantage of Joyvo salmon;
5) Gift channels, continue to exert efforts to give gifts to new channels, and tap the salmon gift market. At the same time, the company's rich online sales channels will also help improve the coverage of C-end consumers.
Continue to develop value-added products and continuously strengthen consumer cultivation.
In addition to the traditional salmon, Arctic sweet shrimp, narrow cod and other seafood whole fish or sliced form, the company will vigorously promote value-added products such as prepared dishes, fit the development model of family catering, and cultivate consumers' eating habits of seafood.
At present, the company's value-added products include fine segmentation products such as fish segments and diced fish sold globally, focusing on the family consumption market segment brand "Mama Bear" series products, "Joyvo Fresh", "Hungry Bear Classmates" and other salmon deep-processed brand foods.
The controlling shareholder intends to inject KB FOOD, and the synergy effect of the company's business is enhanced.
Joyvo Foods and KB FOOD are both part of the Protein 3R business segment of the Joyvo Group.
KB FOOD is one of Australia's largest seafood enterprises, the main business for Australia's regional aquatic products fishing, trading, processing and sales, rich product matrix, more than 6,000 SKUs, the main sales of products include fresh and frozen seafood (the main varieties include Australian shrimp, Australian live lobster, New Zealand bass cod, salmon, etc.), as well as frozen food, dry goods, dairy products and other categories. KB FOOD is Australia's second largest exporter of Western Australian lobster, with more than 3,700 lobster fishing sites and its products are sold worldwide.
In 2021, the company's main business income was 2.01 billion yuan and net profit was 11.771 million yuan. In order to integrate high-quality resources and enhance corporate synergy, Joyvo Group will inject KB Food into the company no later than the end of 2023, which will greatly enrich the company's high-quality seafood categories and enhance the overall strength of the company.
4. Profit forecasting and valuation
Profit Forecast:
1) Salmon: With the slowdown in the impact of the global epidemic, import and export trade, catering tourism gradually recovered, the rapid growth of salmon market demand to promote the continuous rise in prices, the company's product sales prices rose synchronously, it is expected that 2022-24 salmon were 43.7/53.7/60.9 billion yuan, the year-on-year growth rate was 37.5/22.8/13.5%, the gross profit margin was boosted by the rapid rise in product prices, 2022-2024 were 18.3/20.8/20.4%.
2) Narrow cod, Arctic sweet shrimp and other seafood products: the company is engaged in the import and export trade of seafood such as narrow cod and Arctic sweet shrimp, considering that the fishing quota of Russia and the United States, the main producer of narrow cod, is expected to be reduced, and the price of the product will increase, while considering the impact of the international situation and the domestic epidemic, it is expected that the company's seafood such as narrow cod and arctic sweet shrimp will be 11.1/12.6/142 million yuan in 2022-24, with a year-on-year growth rate of 29.9/13.3/13.3%, respectively. Gross profit margin was 10.8/11.9/13.0%, respectively.
3) Beef and mutton and its by-products: It is expected that the company's revenue of beef and mutton and its by-products will be 6.5/7.7/930 million yuan in 2022-2024, an increase of 15.5/18.8/21.0% year-on-year, and the gross profit margin will be 5.4/5.8/6.2% respectively.
Global salmon demand rebound to promote rapid price rise, the impact of the epidemic on import and export trade and the company's seeding, harvesting rhythm gradually faded, we expect the company's net profit in 2022-24 was 2.51/3.84/486 million yuan, corresponding to EPS 1.44/2.21/2.79 yuan, corresponding to the current PE valuation of 19.6/12.8/10.1 times, respectively.
Valuation: Compared with overseas salmon farming companies, the valuation of Joyvo Foods is significantly undervalued.
The market capitalizations of Mowi and Salmar are 764.2 and 51.77 billion yuan, respectively, and the salmon harvest in 2021 is 466.6 million and 182,000 tons, respectively, corresponding to 164,000 yuan and 284,000 yuan per ton, respectively, with an average of 224,000 yuan, while the company's market value per ton is only 80,000 yuan, which is a big gap.
Referring to the valuation level of comparable companies and taking into account the scarcity of the company's license, the company is given 25 times PE in 2022, corresponding to a target price of 36.03 yuan.
5. Risk Warning
1) Risk of natural disasters.
The salmon mariculture stage may be affected by natural disasters and salmon marine predators, common natural disasters include tsunamis, hurricanes, red tides, etc., salmon predators such as sea lions, etc.
2) Biological disease risk.
The salmon breeding process is susceptible to bacterial disease erosion and secondary infection, which affects the quality of the product, reduces the harvest, and causes losses to the enterprise. Common salmon diseases include: sea lice, salmon rickettsial sepsis, infectious salmon anemia and so on.
3) Food safety risks.
If there is a product safety problem, the company's brand image and consumers' willingness to buy will hit, which will affect the company's performance and development.
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