[Click eStock] "Samyang Packaging Secures Competitiveness in Beverage Aseptic Equipment... Target Price Up 11%"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on Samyang Packaging on the 26th and raised the target price by 11% from the previous level to 29,000 KRW. This is based on the judgment that the business focus is shifting from the chemically sensitive chemical industry to the stable beverage industry, and that a reduction in borrowings is expected to improve the financial structure.

Samyang Packaging's annual performance last year showed sales of 367.6 billion KRW, down 2.1% from the previous year. Operating profit grew 25% during the same period to 52.1 billion KRW. Looking at the fourth quarter alone, sales were 81.9 billion KRW and operating profit was 7.5 billion KRW, down 6.9% and 9.5% respectively from the same period last year, but annual profit growth appears to have continued. Hyundong Sung, a researcher at KB Securities, explained, "In the fourth quarter, a temporary net loss was recorded due to the write-down of idle facilities and impairment losses following the withdrawal from the Kato can business," adding, "The elimination of loss-making businesses is expected to improve operating profit margins going forward."

This year's annual performance is forecasted to increase by 6.9% and 8.6% year-on-year to 393 billion KRW in sales and 56.5 billion KRW in operating profit, respectively. Researcher Sung said, "Samyang Packaging's aseptic beverage OEM and ODM competitiveness within the industry is comparable to TSMC in the semiconductor foundry industry," and added, "The aseptic method sterilizes beverages instantly at ultra-high temperatures in a sterile environment and immediately cools and fills them, which preserves taste and aroma better and is superior in hygiene compared to conventional beverage filling methods, earning high technical recognition in the market."

As the adoption of the aseptic method increases, the related market size is expected to grow further. Considering that the method is spreading from tea products such as corn silk tea to coffee, sports drinks, and carbonated beverages, demand is expected to grow from 430 million units in 2016 to 1.14 billion units in 2025.

The production volume gap with latecomers is also positive for the company's performance. There are a total of eight aseptic lines operating domestically, of which Samyang Packaging owns four. Researcher Sung stated, "Samyang Packaging's Line 4, which began commercial production in April 2019, has reached full operational capacity ahead of schedule, and the company is currently expanding Line 5 with a target operation date of June this year."