Pareto Securities’ solid outlook predicts “higher for longer” prosperous time for salmon

Aslak Berge

Pareto Securities believes that salmon’s good times are here to stay, longer than previously assumed.

In a 106-page sector report, published before stock market opening Monday morning, analyst Carl-Emil Kjølås Johannessen increases its salmon prices, raising valuations and price targets for salmon shares.

“We increase our target prices for all salmon farmers as we see a strong market for several years down the road. We have increased our 2018e-2020e salmon prices to NOK 61-63/kg on somewhat lower supply estimates, but also due to stronger demand. Even beyond 2020e we struggle to see enough supply to break the strong price cycle, and we introduce 2021/2022 price estimates of NOK 64/kg “wrote Kjølås Johannessen in the report.

Although the shares in the sector have risen a lot in recent years, there is a lot to go on, believes Johannessen.

“We argue that the solid outlook is not yet fully reflected in current valuations, with the sector trading in line with historical average at EV/EBIT 19e/20e of 9.5x/8x,” he wrote.

The Pareto analyst also believes the good times will last longer and be higher for longer, with profit potential highest also among service companies like AKVA group and London-listed Benchmark Holding (BMK) according to the report.

“We highlight MHG and LSG as our top salmon picks, but also highlight AKVA and BMK as attractive exposures to the long term solid salmon fundamentals.” the report said.


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