[Into the Stocks] GreenPlus, No.1 in Advanced Greenhouses...Top Beneficiary of Government Smart Farm Expansion Policy

Middle East and UAE Overseas Regions Receive Continuous Love Calls
Domestic Advanced Greenhouse Distribution Share Only 1%
Significantly Lower Compared to Global Average of 17%

Photo by Greenplus

[Asia Economy Reporter Park Jihwan] GreenPlus, the No.1 company in the domestic advanced greenhouse sector, is emerging as the biggest beneficiary of the government's smart farm expansion policy. Advanced greenhouses are an essential element of smart farms, enabling year-round production by controlling crop growth conditions. Especially this year, growth expectations are further boosted by the full-scale overseas expansion to countries such as Australia and the United Arab Emirates (UAE).

Photo by Greenplus

Benefiting from Government-led Smart Farm Market Expansion

Smart farms refer to farms that integrate information and communication technology (ICT) throughout all stages of agricultural production, processing, and distribution. The government plans to expand smart farm distribution to 7,000 hectares by next year. Through the Smart Farm Innovation Valley, smart farm infrastructure will be established in four regions: Gimje in Jeonbuk, Sangju in Gyeongbuk, Goheung in Jeonnam, and Miryang in Gyeongnam. The total project cost is estimated at 420 billion KRW, with approximately 280 billion KRW allocated for advanced greenhouse facility construction. Currently, the domestic advanced greenhouse distribution rate is 1%, significantly lower than the global average of 17%. Conversely, this indicates a substantial growth potential. Even if the domestic smart farm market grows to only half the global average, the smart farm construction market open to GreenPlus is estimated by the securities industry to reach about 10 trillion KRW.

With the implementation of government smart farm policies, GreenPlus has already shown an upward performance trend since last year. GreenPlus's sales rose sharply from 46 billion KRW in 2018 and 49 billion KRW in 2019 to 63 billion KRW last year. Kim Jaeyoon, a researcher at KTB Investment & Securities, stated, "From the first quarter of this year, the government's Smart Farm Innovation Valley project has been reflected in the performance, and first-half sales are expected to reach 40 billion KRW, a 36.5% increase from the previous year, achieving record-high results." Annual sales for this year are projected at 92.1 billion KRW, a 47% increase compared to the previous year.

Photo by Green Plus

Following Japan, Successive Overseas Love Calls from the Middle East and Australia

This year, GreenPlus's overseas greenhouse business sales are expected to increase by 34% to 7.9 billion KRW from 5.9 billion KRW last year. Previously, most of the sales were generated within Japan. However, starting this year, growth expectations are rising as expansion into other overseas countries such as the Middle East and Australia is being actively pursued. Kim Gyuri, a researcher at Shinhan Financial Investment, said, "Initial results from the Middle East and Australia this year are expected, and upward revisions of estimates are anticipated as results become visible."

In Australia, GreenPlus is preparing a smart farm construction project in collaboration with KOTRA, the Australian government, and the Australian smart farm company Farm 4.0, with the first order expected in the second half of the year. The Australian government is investing 500 billion KRW annually in agricultural research and development (R&D) to grow the agricultural industry to 80 trillion KRW by 2030.

The UAE is considered a market with even greater future potential than Australia. This is because its food self-sufficiency rate is below 10%, relying mostly on European imports for agricultural products. Researcher Kim Jaeyoon explained, "Although American and European companies are preparing large-scale smart farm construction projects in the Middle East, they are struggling to develop smart farm models suitable for desert climates." In contrast, GreenPlus has been selected as the lead institution for the Rural Development Administration's desert smart farm demonstration project and is developing Middle East-customized greenhouses for the UAE.

Significant Gains but Still Undervalued Stock Price

GreenPlus's stock price has risen 32.03% so far this year until the previous day. Considering that the market return of KOSDAQ during this period was 5.43%, this represents a sixfold higher return. The stock price has steadily followed the upward trend in performance, benefiting from the government-led smart farm policy. However, despite being the only smart farm company domestically and its rarity, securities analysts say the stock price remains undervalued. Currently, GreenPlus's 12-month forward price-to-earnings ratio (PER) is about 18.6 times. Considering that the average PER of global smart farm companies is around 40 times, this is regarded as significantly undervalued. Park Jiwon, a researcher at Kyobo Securities, emphasized, "GreenPlus is entering a phase of accelerated growth, but the current valuation does not reflect the future high-growth story and remains undervalued."

Recovery of Subsidiary Performance is Key

Photo by Greenplus

GreenPlus has subsidiaries including GreenFishFarm, which operates freshwater eel farming, and GreenKFarm, which cultivates strawberries using smart farms. Considering the ongoing impact of the COVID-19 pandemic, it is difficult to expect performance improvement for GreenFishFarm. GreenFishFarm's sales in the first half of this year are estimated at 2.6 billion KRW, a 54.39% decrease compared to 5.7 billion KRW last year. This decline is due to the downturn in the dining-out market, which has worsened eel farming and sales performance. Kim Taehyun, a researcher at IBK Investment & Securities, stated, "Considering the continued impact of COVID-19 following last year, it is difficult to expect immediate performance improvement for GreenFishFarm in the first quarter. However, performance is expected to recover gradually in the second half as vaccines are rolled out."