[Click eStock] "Ottogi, Processed Goods Sales Growth↑ Due to Increased Home Meal Demand"

Daishin Securities Report
Q3 Operating Profit 47.3 Billion KRW... 29% Increase YoY

[Asia Economy Reporter Minji Lee] Daishin Securities presented a target price of 650,000 KRW for Ottogi on the 22nd and predicted that it will show volatility of around 10% compared to the market return over the next six months.

Ottogi's consolidated sales for the third quarter are expected to increase by 10% year-on-year to 653.5 billion KRW, and operating profit by 29% to 47.3 billion KRW. It is forecasted to record results exceeding the market estimate of 45.1 billion KRW.

By segment, in the agricultural and marine processed products sector, sales growth is expected to be prominent due to increased demand for home meals and the expansion of the processed rice market. In the noodle products sector, the market growth rate in the third quarter is estimated to exceed the previous annual estimate of 4%. Ottogi's market share is close to last year's level, and the increase in ramen sales is expected to drive the growth of noodle product sales.

In the oil products sector, sales of commercial-use products were somewhat sluggish due to decreased dining-out demand caused by the COVID-19 pandemic in the first half of the year, but a gradual recovery compared to the first half is estimated.

Yujeong Han, a researcher at Daishin Securities, stated, "Although some agricultural and marine product prices showed high volatility due to the early August monsoon, the possibility of a sharp rise in raw material prices is limited as most are under long-term contracts," and added, "The advertising-to-sales ratio is expected to be maintained at 1.3%, the average level of the first half."

Future focus areas include the expansion of overseas sales proportion and improvement of domestic profitability. From 2015 to 2019, Ottogi's overseas sales grew at an average annual rate of 3%. As of the first half of this year, the proportion of overseas sales is 10%, and the solid growth trend in overseas sales is expected to lead external growth in the future.

Researcher Han analyzed, "The market share of ramen, which had been below the company's profitability, is relatively stabilizing, and the cost ratio of processed marine products is also likely to stabilize after peaking last year," adding, "Attention should be paid to whether domestic profitability improves."