[Click eStock] "Hyundai Green Food, Q2 Turnaround Expected"

Shinyoung Securities Report
Target Price Up 17%

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating on Hyundai Green Food on the 12th and raised the target price by 17% to 14,000 KRW. This adjustment is analyzed to reflect expectations that all business sectors could turn a profit starting from the second quarter.

In the first quarter, Hyundai Green Food reported sales and operating profit of 827.3 billion KRW and 22.2 billion KRW, respectively, representing decreases of approximately 0.9% and 28.4% compared to the previous year. By segment, sales in the catering, food ingredient distribution, and dining-out sectors grew by 2%, 18%, and 14% year-on-year, respectively, driving sales growth on a standalone basis.

However, in the group catering sector, operating profit declined by more than 6 billion KRW due to continued reduced meal counts from the impact of COVID-19 and changes in accounting standards, resulting in a loss and causing a decrease in overall operating profit. Net profit fell about 12% year-on-year, which was better than the decline in operating profit, as equity-method income of 2.9 billion KRW from Hyundai Easywell, an equity-method affiliate, was reflected.

As the impact of COVID-19 eases, recovery in the dining-out and food ingredient distribution sectors is becoming prominent. In particular, the dining-out sector is understood to be benefiting significantly from new Hyundai Department Store locations (Daejeon, Namyangju Premium Outlets, and Yeouido Seoul branch).

Researcher Jung-yeon Seo of Shin Young Securities stated, “The company has introduced eight dining-out brands into The Hyundai Seoul branch, and these brands are expected to account for 10-15% of the dining-out sector’s quarterly sales.” She added, “Decreased overseas project sales from subsidiary Livart and sluggish performance of Dream Tour will be short-term burdens on earnings.”

The company was most severely impacted by COVID-19 in the second quarter of last year, but with adaptation to the COVID-19 situation and gradual improvement in the business environment, it is expected to enter a turnaround phase starting from the second quarter of this year. Researcher Seo said, “The catering business is also expected to return to profitability from the second quarter,” and added, “In the mid-to-long term, the company plans to enhance the role of the Smart Food Center, which is in its second year of operation, as a central kitchen, thereby improving efficiency between the center and catering business sites.”