[Asia Economy Reporter Eunmo Koo] As the second quarter earnings announcement period approaches, food stocks are rising, centered on stocks with high earnings expectations. It is analyzed that the demand for processed foods, which increased due to the spread of the novel coronavirus infection (COVID-19), is being maintained due to the prolonged situation, thereby raising expectations for earnings improvement.
According to the Korea Exchange on the 16th, Nongshim's stock price closed at 344,000 won, up 0.58% (2,000 won) from the previous trading day. In particular, it once rose to 365,000 won during the session, marking a 52-week high. Food stocks have shown a solid stock price trend as beneficiaries despite the impact of COVID-19. Nongshim's stock price recorded a 31.2% return this year until the previous day, and during the same period, Pulmuone (48.9%), Samyang Foods (34.6%), and CJ CheilJedang (25.3%) also rose significantly.
The increased demand for food at home due to COVID-19 has been maintained until the second quarter, raising expectations for earnings, which is interpreted as also strengthening stock prices. Food-related stocks are continuing differentiated growth, supported by the spread of home-cooked meal culture and expansion of online consumption despite uncertainties caused by COVID-19. In particular, as COVID-19 cases continue to occur and anxiety persists, even if COVID-19 ends, it is analyzed that the slowdown in demand for food at home will not proceed rapidly, which is reflected in the earnings expectations and stock prices of food stocks.
Jomi Jin, a researcher at NH Investment & Securities, forecasted, "Based on the downward stabilization of raw material prices in the first half of this year, easing of promotional competition, continued normalization of domestic demand due to increased food demand, and expansion of consumer base in overseas markets, the trend of operating profit growth in the food sector is expected to continue in the second half."
According to financial information provider FnGuide, Nongshim's operating profit for the second quarter of this year is estimated at 28.3 billion won, a 244.7% increase compared to the same period last year. During the same period, CJ CheilJedang is expected to record 240.7 billion won (37.3%), Pulmuone 13.4 billion won (23.7%), Samyang Foods 24.0 billion won (15.5%), and Daesang 38.8 billion won (15.0%), all maintaining double-digit operating profit growth rates.
Even if COVID-19 ends, food stocks are expected to continue growing, centered on the online home meal replacement (HMR) market, supported by the ongoing increase in demand for eating at home. Lee Jung-eun, a researcher at Korea Investment & Securities, said, "Thanks to retailers' investments in online food and beverage infrastructure and expansion of delivery services, the influx of new customer groups is accelerating," and predicted, "Even after COVID-19 ends, the changed consumption patterns will continue."
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