China Fishery: Daiwa issued an unrated note on the counter and cited the group is positioned to meet rising demand for fishmeal and fish oil, holding the rights to 17% of Peru's fishing quota.
Recall, Peru’s fishmeal sector was impacted by the El Nino phenomenon in 1H14, resulting in the closure of the second anchovy fishing season. Consequentially, China Fishery’s revenue for 2QFYSep15 (Jan-Mar) fell by 57% y/y, with the bulk of sales a result of drawing down existing inventory.
Despite projections of a stronger El Nino in 2015, Peruvian's govt decided to bring forward the start of the country’s first anchovy fishing season (Apr-Jun), which means that catches will likely not be affected.
A quick check with China Fishery revealed that the company is on track to fully utilise its fishing quota, equating to about 0.44m tonnes by end-Jun.
Further, gross margin is expected to expand from a low oil price environment, as fuel costs accounts for ~30% of COGS.
According to a recent report by Allied Market Research, the global fish oil market should reach USD2.63bn by 2020, registering a CAGR of 6.1% over 2015-20. Most of the consumption will stem from Asia Pacific and Europe.
China Fish is trading at a 16x P/E, based on the consensus FY16 forecast.
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