[Click eStock] Binggrae Lowers Target Price Due to Profit Estimate Downgrade

[Asia Economy Reporter Lee Seon-ae] IBK Investment & Securities announced on the 18th that it is lowering the target price of Binggrae from the previous 88,000 KRW to 72,000 KRW. This decision is based on the unavoidable decline in profit estimates for this year. However, the buy rating is maintained.

Binggrae's consolidated sales and operating profit for this year are estimated at 1.1176 trillion KRW (+16.5% yoy) and 46.1 billion KRW (+15.6% yoy), respectively. With the full-year reflection of Haitai Ice Cream's performance, this is expected to be the first year where annual sales exceed 1 trillion KRW. A decline in margin is inevitable. However, considering that Haitai Ice Cream's operating profit turned slightly positive last year from a 3 billion KRW loss in 2019, and the base effect on the frozen division (separate) performance in Q3 last year, which was sluggish due to an unprecedented long rainy season, operating profit is also expected to improve.

Kim Tae-hyun, a researcher at IBK Investment & Securities, emphasized, "Although we are lowering the target price due to downward revisions in profit estimates for this year and next, the performance expectations remain valid, and since synergy in the ice cream business between the two companies is expected from this year, we maintain the buy rating."

Consolidated sales and operating profit for Q4 last year were 221.2 billion KRW (+18.2% yoy) and a 14.2 billion KRW loss (4Q19: 1.5 billion KRW loss), respectively. These figures fell short of IBK Investment & Securities' operating profit estimates (sales: 213.1 billion KRW, operating profit: 1.7 billion KRW loss). Due to increased selling and administrative expenses, including salaries, commission fees, and advertising expenses, operating profit on a separate basis was weak. Although consolidated sales increased significantly from Q4 with the reflection of Haitai Ice Cream's performance, the loss margin widened.