China’s leading tilapia processor is in bullish mood as it builds major new processing capacity and a new fish feed plant — part of a company plan to reduce costs through benefits of scale.
As part of its goal to become the world’s dominant tilapia integrated player Baiyang is lining up a wholly owned subsidiary, Bai Jia Co., and going ahead with a plant with 15,400 metric tons (MT) annually of tilapia processing capacity.
Located in the city of Beilu in Guangxi province, the CNY 10.8 million (USD 1.7 million, EUR 1.3 million) plant is already under construction: company boss Sun Zhongyi said he wants to capitalize by locating the plant on the border of Guangxi and Guangzhou provinces, tapping key tilapia farming regions like Luchuan and Bobai in easterly Guangxi and Gaozhou and Xinyi in westerly Guangzhou.
A key supplier to the U.S. market, Baiyang is trying to expand its scale in order to push down its costs, according to a statement from Sun Zhongyi, who said the new capacity “is in line with our strategy of achieving better synergy, increasing scale and raising profitability.” The company in 2013 had income of CNY 135 million (USD 21.6 million, EUR 15.9 million), up by 15.28 percent but profit fell 32.8 percent year-on-year to CNY 56.8 million (USD 9.1 million, EUR 66.7 million). Baiyang blamed the data on higher aquatic feed raw materials and high prices of tilapia purchased from farmers.
The company’s financial performance improved somewhat in the first quarter of 2014: revenues rose 29.4 percent to CNY 210 million (USD 33.6 million, EUR 24.7 million) with profits up 10.6 percent to CNY 45.5 (USD 7.3 million, EUR 53.5 million). Baiyang is predicting profits in the first half of 2014 will rise by up to 30 percent because of the coming-online of new tilapia cultivation bases in Hainan province. That target is realistic, according to analysts Zhou Wei and He Jun at Wan Guo Securities, who cover Baiyang. Recovering Western demand for tilapia as well as new capacity coming online makes Baiyang’s growth viable, said the analysts.
With a market cap of CNY 1.84 billion (USD 294.5 million, EUR 216.3 million), the company remains the best performing of China’s listed seafood firms. Its stock was trading at CNY 21.17 (USD 3.39, EUR 2.49) on Friday, but has been volatile in the past year, having fluctuated from CNY 15.50 (USD 2.48, EUR 1.82) to a high of CNY 26.79 (USD 4.29, EUR 3.15) in December 2013. But Baiyang’s earnings per share at CNY 0.65 (USD 0.10, EUR 0.08) are the highest among China’s listed seafood stocks.
It’s not just processing that Baiyang is expanding: the firm is spending CNY 147 million (USD 23.5 million, EUR 17.3 million) on a new feed production plant in Foshan which will produce 180,000 MT a year when completed in 2015. The plant will give the firm access to the market in Guangdong, a key region for the cultivation of both shrimp and tilapia. Baiyang relies on tilapia processing for 61 percent of its revenues with 31.3 percent coming from fish feed and 3 percent from shrimp feed.
