Northern Lights

The Scottish Salmon Company (Buy, TP: NOK13.00) - Strong start to the ...

The Scottish Salmon Company’s Q1 trading update revealed higher than expected harvest volume and margins, driving operating EBIT (GBP13.1m) some 86% ahead of market expectations. Management maintains its 26.5kt harvest guidance for 2018, which we consider somewhat optimistic given the cold temperatures and volume downgrades by peers. Following the strong Q1 report and lower cost estimates, we have raised our 2018–2020e EPS materially (39–13%). We reiterate BUY and have raised our target pr...

Lifting our long-term assumptions

Following high takeout of fish, cold water and algae affecting growth, we have cut our 2018 harvest growth by 43kt, and now see 4.5% (6.5%) harvest growth in 2018e. We have raised our 2018 salmon price estimate to NOK58/kg (NOK55), while 2019e is unchanged at NOK59/kg and we introduce NOK59/kg for 2020. We remain positive on the sector as we see supply growth stabilising at 5–7% in 2018–2020 and believe salmon prices will remain high during the period.

Solid Q2 results

H1 operating EBIT was GBP19.2m, implying Q2 EBIT was 21% above our estimate and 39% above consensus. We have raised our 2017–2019e EPS by 4.5–0.8% following the strong H1 and slightly better cost guidance. We maintain our BUY recommendation and have raised our target price to NOK13 (NOK12).