Has the partial lifting of the ban on Japanese seafood in the mainland created an opportunity for Hong Kong seafood import and export agents to rise?

The wave of business closures has become a hot topic in Hong Kong, with bad news coming one after another, from small street shops to chain restaurants, and chain dining groups have to issue profit warnings. In the midst of the industry's lamentations, only companies that can adapt quickly and have solid foundations can stand their ground in this harsh winter. Ocean Global (08476.HK), engaged in seafood wholesale and import-export business, $OCEAN ONE HLDG (08476.HK)$ is an example; relying on stable product quality, it has still maintained a trend of profit growth during the cold winter, and is expected to benefit from the recent restoration of seafood imports in certain regions of the mainland, making the future growth potential of its mainland business worth noting.

The challenges facing the retail market in Hong Kong are reflected directly in the retail data. In May, the total retail sales value rose by 2.4%, ending a 14-month streak of decline. Merchants need to adapt to the changing consumer patterns; not only is online shopping more prevalent, but consumers are also seeking products and services with "value for money," and during the transformation, it is essential to maintain stable service and product quality to retain customers.

In the cold winter of the Hong Kong restaurant industry, quick transformation is necessary.

Speaking of transformation examples, LH GROUP (01978.HK) cannot be overlooked. $LH GROUP (01978.HK)$ Originally famous for operating Chinese restaurants, LH GROUP gradually transformed into an Asian cuisine restaurant as the tastes of the Hong Kong dining market changed, bringing in several overseas brands through franchising, including well-known Japanese restaurants such as "Gyukaku" and "Warm Vegetables."

Despite the sluggish market conditions, LH GROUP's performance still had to "see red"; in 2024, LH GROUP's revenue decreased by approximately 17.3% year-on-year, with a recorded loss of about 32.1 million yuan. However, thanks to early transformation, LH GROUP adjusted its strategy to cope with the winter by opening new stores, having closed a total of 12 restaurants from early last year to June, while also opening 19 new restaurants in the same period.

If LH GROUP is a representative of restaurant transformation, then the listed company Ocean Global, which imports and acts as an agent for mid-to-high-end frozen seafood, represents stable performance. This not only reflects the company's stable product quality, which helps to maintain customer sources, but also indicates that seafood itself is a stable long-term consumption trend, with huge and steady demand in both Hong Kong and mainland China.

The conditional resumption of seafood imports from certain regions will boost mainland businesses.

On June 29, the mainland General Administration of Customs conditionally resumed seafood imports from certain regions of Japan, excluding ten counties such as Fukushima, marking the first partial lifting since the ban implemented in August 2023. According to statistics from Japan's Ministry of Agriculture, Forestry and Fisheries, Japan's seafood export value to China reached 87.1 billion yen in 2022, equivalent to about 4.7 billion Hong Kong dollars, making it the largest export market; however, after the Chinese side implemented the import ban, the export value almost dropped to zero.

According to data from the National Bureau of Statistics, China's total aquaculture production increased from 64.8036 million tons in 2019 to 73.66 million tons in 2024, with a compound annual growth rate (CAGR) of 2.6%. According to the report from the China Research Industry Institute titled "2025-2030 China Aquaculture Industry Market Panorama Research and Investment Value Assessment Research Report," total production is expected to reach 76.2 million tons by 2025, with a growth rate of around 3.5%. Consumption upgrade has driven per capita demand for aquatic protein to increase from 14.3 kg in 2019 to 16.1 kg in 2024, with continuous growth expected in 2025. As consumers pay more attention to organic certification and geographical indication products, the trend of increasing consumption of aquatic products in China remains unchanged, with an annual growth rate of about 2% to 3%, and this growth trend is expected to continue over the next decade.

The trend of consumption growth in China will remain unchanged for the next ten years.

In fact, the annual report performance of Ocean Global during the same period also indicates strong demand in the Chinese market for high-end seafood. The company's revenue from China grew by 40.6% year-on-year (before the ban) to approximately 57.837 million HKD for the fiscal year ending March 2023. Revenue from China is expected to continue to grow by 67.3% year-on-year for the fiscal year ending March 2024, reaching approximately 96.746 million HKD. The impact of the ban will only become apparent for the fiscal year ending March 2025, causing the company's revenue from China to decline to 46.08 million HKD. With the gradual lifting of the import ban on Japanese seafood in the mainland, the product range offered by Ocean Global will further increase, which is believed to boost sales in China.

The trend of seafood consumption among Hong Kong residents remains stable.

Hong Kong's preference for seafood also persists. According to data from the Census and Statistics Department, the annual import volume of seafood in Hong Kong exceeded 350,000 tons from 2012 to 2021. Comparing with past figures, the import volume has not changed significantly over twenty years, reflecting that the types of seafood preferred by Hong Kong residents may have evolved. For example, there has been an increased demand for the quality of oysters in recent years, with more varieties arriving in Hong Kong, but the overall demand for seafood has not changed much, which naturally benefits seafood agencies and import businesses.

Ocean Global has over 22 years of experience in the frozen seafood import and agency industry, supplying a wide variety of frozen seafood products with over 100 varieties. The company exclusively represents several international brands in the Hong Kong and Macau regions, such as Clearwater scallop sushi slices, as well as well-known products including Japanese cooked scallops, king crab legs, and kabayaki eel, which are highly favored by consumers.

In contrast to other dining enterprises, such as LH GROUP which reported a loss last year, Ocean Global still maintained profit growth amidst declining revenue during the same period, and its gross margin steadily increased, reflecting impressive sales performance.

When comparing to the net profit of approximately 6.654 million HKD in its first fiscal year after being listed in 2018, Ocean Global's net profit has increased by about 5.3 times over eight years since listing, indicating a stable growth trend in net profit. Additionally, it maintains steady annual dividend payouts, actively rewarding Shareholders, which reflects ample cash flow and a solid financial status.

Moreover, Ocean Global announced on April 15 that it has appointed professionals to assess and evaluate the possibility of transferring to the Main Board. After the transition to the Main Board, the company expects more opportunities for business expansion and promising development potential.

Author: Philip

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