[Click eStock] "Dongwon F&B, Profit Improvement Expected This Year"

Hana Financial Investment Issues 'Buy' Rating and 330,000 KRW Target Price... Closing Price on 26th at 218,500 KRW

[Asia Economy Reporter Kum Boryeong] Dongwon F&B is expected to show profit improvement this year.

According to Hana Financial Investment on the 27th, Dongwon F&B's consolidated sales for this year are expected to be 3.2611 trillion KRW, and operating profit is forecasted at 115.4 billion KRW. These figures represent increases of 7.6% and 13.8% respectively compared to the previous year.

Dongwon F&B's stock price fell more than 20% throughout last year. Despite the average input fish price dropping 18% from the previous year, the cost reduction effect was offset by increased promotional expenses due to intensified competition in processed foods. As expectations for performance improvement declined toward the second half of the year, the stock price also showed a significant drop.

Until the first half of this year, the cost reduction trend due to falling fish prices is expected to continue. However, from last week as a turning point, fish prices have hit bottom and rebounded, so the cost burden in the second half is expected to be similar to the previous year. Notably, due to the profitability improvement management policy of competitors, the burden of promotions is expected to ease compared to the previous year.

Shim Eunju, a researcher at Hana Financial Investment, said, "Considering the current tuna inventory, a cost reduction effect of 2 to 3 billion KRW per quarter is estimated until the first half. The expected easing of competition intensity compared to last year due to competitors' profitability improvement management policy is also positive. A virtuous cycle is expected where cost reductions lead to profitability improvements." She added, "The profit leverage effect from Dongwon Home Food's top-line growth has been visible since the second half of last year. Samjo Celtec is also expected to contribute to profits due to increased operating rates of its second plant. Although Samjo Celtec's fixed costs are estimated to increase by about 1 billion KRW per quarter, the operating rate is understood to be rising rapidly."

Hana Financial Investment gave Dongwon F&B a 'Buy' investment rating with a target price of 330,000 KRW. The closing price on the 26th was 218,500 KRW.