– Buckle up for a tsunami of cash

In Giskeødegårds analytic report he points that with an average 7% dividend yield and companies priced at an average 2016E P/E of 10x on our estimates, they still find the sector attractive.

- In this report, we raise our 2016 salmon price estimate to NOK 58 (55) per kilo and our 2017 estimate to NOK 55 (52). Based on upside potential, our sector top picks are SalMar and Marine Harvest.

- We estimate that the Norwegian industry is running at 5-6% below full capacity owing to sea lice issues in 2015. We therefore expect somewhat higher harvesting in 2017. The production in Chile and Canada is trending down substantially, and y/y we expect 7% lower harvesting in 2016 and 2% higher in 2017. The industry is investing substantially in new smolt facilities and we expect increased investment in various new technology projects fuelled by the wave of R&D licences. Nevertheless, there is no material increase in volumes coming out until 2019 at the earliest.

Demand and prices

Over the past 20 years, the global production of salmon has increased 500% and prices in 2015 were 60% higher than in 1995. Annual demand growth of 10-15% has been driven by product development (from whole fish to ready-to-eat portions) and health trends (from red meat to seafood). There is also a focus on antibiotics. For example, Icelandic agriculture is the cleanest in Europe in terms of antibiotic use, but Iceland still use 12 times more antibiotics than Norwegian salmon, and the average in Europe is 200 times higher than Norwegian salmon.

- The price impact in the markets has been substantially stronger than we had expected and is now NOK 60 per kilo on average for H1 2016. As we expect average H2 salmon prices to be 5% lower y/y, our average 2016E salmon price is NOK 58 (55), while we raise 2017E salmon price to NOK 55 (52). We lift our target prices for most companies in our universe. On average we see a 28% upside for