Outlook for the Vietnam fisheries industry

Regarding the Vietnam fisheries sector prognosis for the second half of 2024, KB Vietnam believes that all main markets are beginning to show signs of recovery, however, the pace is gradual and there are still many unknown elements. Major central banks have begun to make efforts to decrease interest rates, with the ECB reducing rates in early June and the Fed anticipating to drop rates in the second half of the year. These are all good aspects influencing consumer purchasing power.

However, the Vietnam fisheries industry faces several uncertainties, including (1) anti-dumping taxes, (2) political difficulties that may cause freight prices to spike, and (3) an IUU yellow card impacting exports to the EU. Furthermore, Vietnamese fisheries goods must compete with those from other nations in terms of price and quality, necessitating the improvement of 'deep' processing capabilities by local enterprises. For the US market, the whole sector is awaiting government judgments on antisubsidy and antidumping levies.

Furthermore, Vietnam competes hard with Ecuadorian shrimp in this market, owing to distance and price advantages. Exports to China benefit from geographical advantages, as well as limit ed shrimp imports from Ecuador and India owing to sulfite residues.

Although demand in Japan is sluggish to recover, this market continues to favor extensively processed items, giving Vietnamese shrimp an advantage over shrimp from other nations. Any firm capable of deep processing will gain from this market.

Shrimp enterprises are all seeking for their own path in the face of delayed export recovery and fierce competition from Ecuador and India. FMC specializes in thoroughly processed shrimp and has had a considerable presence in the Japanese market. MPC had problems in the US market and sought to return to the local market through strategic partnership with MWG's BHX chain. CMX intends to expand fish processing and export to the Korean market in collaboration with Emart, the country's largest supermarket chain.

The resurgence of the market in the United States has enabled pangasius exports to meet high expectations in 2H24. Furthermore, the United States and Western nations have passed an order prohibiting pollock from Russia, which will assist Vietnamese pangasius. Pangasius export prices are also likely to rise modestly in the second half of the year due to supply constraints caused by low pricing and bad weather conditions. However, KB Vietnam believes that rising freight charges have a significant impact on exports to the US and EU markets, thereby reducing exporting enterprises' profitability.

Pangasius exporters anticipate a comeback in 2H24, when demand from big markets improves. VHC is a prominent firm in the sector, with the potential to grow markets and control costs well, particularly with zero anti-dumping duty in the US market, so it may outperform other pangasius exporting rivals. Enterprises like IDI and ANV also hope to increase their exports, although the prospects are not as promising as VHC.

In terms of valuation, most fishery stocks are at the five-year average P/B level, suggesting the market's benign outlook for these businesses in the short term. With the probability of a gradual recovery and several unclear circumstances, KB Vietnam assigned a neutral rating to this sector. However, it stated that during declines, investors should focus on market leaders with strong competitive advantages, such as VHC and FMC. Furthermore, investors might buy equities when anti-dumping taxes, IUU yellow card, and freight charges improve.