[Click eStock] "Kyochon F&B, Stable Growth... Target Price 26,000 Won"

[Asia Economy Reporter Song Hwajeong] Eugene Investment & Securities forecasted on the 24th that Kyochon F&B will continue its stable growth trend and newly issued a 'Buy' investment rating with a target price of 26,000 KRW.

Researcher Park Jongseon of Eugene Investment & Securities stated, "With an upside potential of 35.4%, we initiate coverage with a 'Buy' rating," adding, "The target price of 26,000 KRW is based on this year's expected earnings per share (EPS) multiplied by the average price-to-earnings ratio (PER) of 16.9 times for similar domestic and peer companies. The current stock price reflects a PER of 12.4 times based on this year's earnings."

It is expected that stable earnings growth will continue through domestic market dominance. Researcher Park analyzed, "Among the top three domestic dining industry sectors (Korean cuisine, chicken, coffee), chicken has the highest compound annual growth rate (CAGR) of sales per franchise store at 7.6%. Kyochon F&B maintains stable earnings growth by systematic franchise management, achieving the highest annual sales per franchise store and the lowest franchise closure rate compared to competitors." As of the end of last year, Kyochon F&B had 1,269 franchise stores, with only one closure during the COVID-19 situation. Annual sales per store reached 740 million KRW.

Expansion of medium-to-large stores, continued overseas expansion, and entry into the home meal replacement (HMR) market are also viewed positively. Kyochon F&B has advanced store concepts through conversion to medium-to-large stores and is expanding new specialty stores tailored to unique commercial districts. The proportion of medium-to-large stores increased from 52% in 2018 to 61% in 2019, and 71% last year. The number of overseas stores also grew from 42 last year to 47 by the end of the first quarter. In the HMR market, about 120 diverse products are planned to be launched this year.

Sales are expected to break records again in the second quarter following the first quarter. Kyochon F&B recorded sales of 123.9 billion KRW and operating profit of 10.8 billion KRW in the first quarter of this year, up 17.4% and 13.2% respectively from the same period last year. Researcher Park said, "With strong earnings growth in the first quarter, the highest quarterly sales were achieved," and forecasted, "Second quarter expected sales are 127.2 billion KRW and operating profit 12.5 billion KRW, increasing 15.6% and 113.8% respectively year-on-year, breaking the highest sales record along with earnings growth."