Sustainable Offshore Aquaculture Will Power Global Protein Demand

Key Takeaways

• Breakthroughs in fish health and risk prevention are set to accelerate margin growth and earnings beyond current market expectations.
  
• Strategic leadership in offshore aquaculture, sustainability, and cost control positions SalMar for sustained expansion and premium market access.
  
• Operational and regulatory challenges, costly expansion, price volatility, and rising sustainability demands pose ongoing risks to profitability, growth, and competitive position.

Catalysts

An aquaculture company, produces and sells farmed salmon in Asia, North America, Europe, and internationally.

• Analyst consensus sees SalMar's growing harvesting and processing capacity as a revenue growth driver, but this view understates the significance of SalMar's record high biomass in the sea and its outsized share of Norway's growth, positioning the company to aggressively outpace peers in volume expansion and revenue recovery once the temporary quality/downgrade challenges are resolved.
  
• Analysts broadly agree that investments in fish welfare and advanced biological management will gradually improve margins, but they underappreciate the transformative potential of new vaccine regimes and preventive technologies, which are set to rapidly slash downgrade rates and biological risk across key cohorts, sharply boosting net margins and earnings much sooner than expected.
  
• SalMar's pioneering moves in offshore and open-ocean aquaculture, now consolidated into a focused wholly owned SalMar Ocean segment, set the stage for unlocking large-scale, low-cost production in optimal ocean sites-allowing sustained multi-year volume growth and long-term margin improvement as global seafood demand rises.
  
• The company's strategic flexibility, robust financial position, and strong reputation for sustainability make it uniquely qualified to capture premium contract opportunities in emerging markets, especially in Asia, where demand for traceable and environmentally friendly protein is accelerating, directly supporting higher average selling prices and top-line growth.
  
• As cost pressures ease due to broader adoption of alternative feed ingredients across the sector and SalMar's ongoing automation investments, the company is poised to achieve significant structural reductions in input costs, enabling EBITDA margin expansion well ahead of industry averages.

SalMar Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on SalMar compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming SalMar's revenue will grow by 17.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.5% today to 23.3% in 3 years time.
• The bullish analysts expect earnings to reach NOK 9.5 billion (and earnings per share of NOK 71.31) by about September 2028, up from NOK 1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.5x on those 2028 earnings, down from 64.0x today. This future PE is lower than the current PE for the GB Food industry at 24.7x.
• Analysts expect the number of shares outstanding to grow by 1.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.16%, as per the Simply Wall St company report.

SalMar Future Earnings Per Share Growth

Risks

• Persistent biological challenges such as high levels of downgraded fish and issues from jellyfish attacks and wound problems have led to weak price achievement and elevated operational costs, which can pressure net margins if not effectively managed over time.
  
• Regulatory risk remains high, with upcoming changes in Norway's white paper proposing significant revisions to licenses, lice quotas, and fees; any tightening or prolonged industry uncertainty could cap future volume growth and stall revenue expansion.
  
• The company's strategy of large-scale investment in biomass and offshore aquaculture, including mergers and technology upgrades, raises the risk of cost overruns and higher leverage, which could limit future earnings if these investments fail to quickly deliver the expected financial returns.
  
• Increasing global supply in the first half of 2025, coupled with weaker spot prices and ongoing tariff uncertainty in key markets such as the U.S., exposes SalMar to the risk of lower average selling prices and volatile revenue streams.
  
• SalMar acknowledges areas for significant improvement in sustainability and faces strong consumer and regulatory demand for "ethical" aquaculture; failure to keep pace with long-term shifts toward alternative proteins or stricter sustainability standards could gradually erode both top-line revenue and market position.

Valuation

• The assumed bullish price target for SalMar is NOK650.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of SalMar's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK650.0, and the most bearish reporting a price target of just NOK420.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be NOK40.8 billion, earnings will come to NOK9.5 billion, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 6.2%.
• Given the current share price of NOK535.0, the bullish analyst price target of NOK650.0 is 17.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.