Ottogi, Strong Q2 Earnings Expected... Target Price Up 11.7%

[Asia Economy Reporter Park Jihwan] Hanwha Investment & Securities on the 4th presented a 'Buy' investment opinion on Ottogi, expecting the company to record better-than-expected strong performance in the second quarter of this year, and raised the target stock price by 11.67% from the previous 600,000 KRW to 670,000 KRW.

Researcher Son Hyoju of Hanwha Investment & Securities stated, "Ottogi's consolidated sales for the second quarter are expected to reach 612.6 billion KRW, and operating profit 44.9 billion KRW, representing increases of 8.0% and 18.6% respectively compared to the same period last year." This is analyzed to be due to the steady demand for processed foods in the domestic market continuing from the first quarter.

By segment, it is explained that steady growth is expected in noodle products due to solid demand for existing products along with strong sales of newly launched products such as Jin Bibimmyun, Otongtongmyun, and Jin Jjajara. In particular, while demand remains steady mainly for key products, profitability is expected to improve due to reduced marketing activities, it added.

Researcher Son diagnosed, "Since Ottogi has shown stable profitability so far, in terms of profit leverage, the momentum will be weaker compared to competitors whose performance has been sluggish due to increased costs. Also, as the proportion of overseas business is absolutely low, the momentum for the recently expanding overseas export growth will be relatively weak."

He emphasized, "Momentum seems necessary for additional growth," adding, "Although the timing cannot be predicted precisely, momentum for additional growth such as governance restructuring and price increases for performance growth exists in the mid- to long-term perspective."