Investment viewpoint: Which fishery stocks are on the radar?

Sao Ta Food JSC (FMC) has stocked up on shrimp in the past time. So, the recovery of fisheries industry would benefit this company.

The fishery production and processing activities of the Southern provinces and cities - key areas of Vietnam's fisheries sector, accounting for 90-95% of the country's seafood export turnover, have been adversely affected by the COVID-19 pandemic. Vietnam Association of Seafood Exporters and Producers (VASEP) reported that August fisheries export turnover sharply decreased to USD588 million, down 28% YoY. Main export products such as shrimp, pangasius, tuna, squid, octopus, and crabs decreased by 20-33% YoY. August export turnover to the US and European countries decreased by 16-50% YoY. However, thanks to good business results in 7M21, 8M21 growth rate increased 7% YoY or USD5.6 billion, of which USD2.45 billion is from shrimp exports.

In the short term, fishery production and processing activities of businesses in the Southern region are expected to gradually recover. 4Q21 should be the time for preparing large orders especially from the U.S and Europe thanks to the recovering demand when the pandemic is better controlled. Fishery export turnover should increase in the last months of the year. However, KB Securities said there would be still potential risks associated with social distancing measures in the Southern provinces, which may lead to labor shortages and factories' not operating at full capacity.

In the coming time, pangasius exports are expected to recover. According to VASEP, the demand for importing pangasius in many markets such as the US, Brazil, Mexico started to bounce back. In addition, pangasius export prices are higher than usual, which is considered a positive signal in the year-end period for Vinh Hoan Corporation (VHC).

Shrimp exports should recover in 4Q21 thanks to the uptrend of selling prices due to supply shortages from India and Indonesia. The recent decrease in the selling price of raw shrimp and the impact of the disease has made farmers hesitant for the year-end shrimp farming, partially affecting the supply of raw shrimp for export enterprises.

However, KB Securities said this would be also an opportunity for businesses with a large proportion of raw shrimp sources from self-farming like Sao Ta Food JSC (FMC). This company has also stocked up on shrimp in the past time. Besides, it is located in Soc Trang Province which is less affected by the pandemic due to flexible prevention measures rather than others.

KB Securities takes a positive stance for the fisheries industry in 4Q thanks to the post-pandemic recovering trend of import countries and increasing export prices. It recommended VHC and FMC in this industry.