[Click eStock] "Maeil Dairy Expands Selex Lineup... Q2 Earnings Up"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 100,000 KRW for Maeil Dairies on the 18th, expecting an improvement in second-quarter earnings.

Consolidated sales for the first quarter increased by 3.4% to 370.2 billion KRW. Operating profit recorded 17.7 billion KRW, down 12% compared to the same period last year. Eunju Shim, a researcher at Hana Financial Investment, said, "Despite a challenging business environment, the company posted solid results," adding, "Considering the increase in advertising and promotional expenses and commission fees due to the expansion of the adult health food 'Selex' product line, the results are judged to meet market expectations."

The decline in domestic manufactured infant formula sales is being offset by Selex. The sales proportion of Selex is estimated to rise from 3% last year to 5% this year. Relatively high-margin products such as cup coffee, Sangha Farm, and Almond Breeze (grain milk) are showing steady growth.

Second-quarter expected consolidated sales and operating profit are estimated at 377.2 billion KRW and 25 billion KRW, respectively, representing increases of 6.2% and 22.8% compared to the same period last year. Since March, with the recovery of convenience store traffic, Maeil Dairies is also analyzed to be recording significant sales growth.

Researcher Shim explained, "Considering the sales growth of high-margin products such as processed milk and cup coffee, which have a relatively high proportion in the convenience store channel, solid profit improvement is expected," adding, "The total demand for beverages, which was sluggish due to weather effects last year, is likely to recover overall." Selex is also predicted to show quarterly sales growth through product line expansion.

Finally, Researcher Shim analyzed, "This year, we can expect sales expansion of Selex and a base effect," adding, "The current stock price has a 12-month forward price-to-earnings ratio (PER) of 9 times, making it a valid low-price buying opportunity."