[Click eStock] "Maeil Dairies, Expecting Base Effect and New Product Sales Expansion"

[Asia Economy Reporter Park Jihwan] Hana Financial Investment evaluated Maeil Dairies on the 21st, expecting this year's performance to increase due to last year's base effect and expanded sales of new products. They particularly assessed that the current stock price level is undervalued, making a low-price buying strategy effective. They gave a 'Buy' investment opinion and set a target price of 100,000 KRW.

According to Hana Financial Investment, Maeil Dairies' consolidated sales for the first quarter of this year are estimated to be 376.1 billion KRW, a 5% increase compared to the previous year. Operating profit is also expected to decrease by 1.9% to 20 billion KRW. Researcher Shim Eunju stated, "Due to COVID-19, the decrease in convenience store traffic has led to continued sluggish demand for dairy products, creating a difficult external environment, but solid performance is expected thanks to favorable sales of new products (adult health foods)."

She added, "Domestic manufactured infant formula sales are expected to continue declining compared to last year," noting that "the decrease in domestic birth rates and the expanding market share of foreign infant formula companies remain burdensome factors." Exports of infant formula manufactured in China are estimated to be around 4 billion KRW.

Sales of adult health food brand Selex are expected to increase compared to the previous year. The sales proportion of Selex is projected to rise from 3% last year to 5% this year. It is understood that steady growth continues in relatively high-margin products such as Sangha Farm and grain milk (Almond Breeze).

This year's annual sales and operating profit are estimated at 1.5347 trillion KRW and 94 billion KRW, respectively, representing increases of 4.9% and 8.6% compared to the previous year. Last year, due to COVID-19, school openings were delayed and outdoor activities were restricted, leading to sluggish front-end demand.

However, the recent recovery in convenience store traffic is viewed positively. Researcher Shim emphasized, "Recovery in demand is expected due to the base effect of cup coffee and processed milk, which have a high proportion in the convenience store channel."

She also analyzed that a low-price buying strategy is effective. Researcher Shim stated, "The price-to-earnings ratio (PER) is only 8.6 times. Despite the negative operating environment caused by COVID-19, the market share of major products continues to rise," adding, "We positively assess the strengthening of the company's fundamentals due to improved product mix."