[Click eStock] "Binggrae, Both Ice Cream and Dairy Beverage Businesses Are Doing Well"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 4th issued a buy rating and a target price of 80,000 KRW for Binggrae. This is based on the judgment that both the ice cream and dairy beverage divisions are expected to show growth this year, potentially strengthening profit resilience.

Binggrae posted sluggish profits last year. While it had previously recorded profits of 60 billion KRW, last year’s profit was only 39.8 billion KRW. Binggrae’s sales proportion by category is evenly split between dairy beverages and ice cream, each accounting for 50%. However, sales of dairy beverages declined significantly due to a sharp drop in convenience store traffic. Dairy beverages are products with a high sales ratio through convenience store channels, and especially "Banana Milk" consistently ranks first in convenience store sales.

However, since March, convenience store traffic has rapidly recovered, and dairy beverage sales have also risen accordingly, leading to predictions of increased profits this year.

The ice cream market has recently enjoyed a boom due to the combined effect of increased sales of large-sized products for home use and the expansion of new channels such as ice cream discount stores. Last year, the combined sales of the four major ice cream companies (Lotte Confectionery, Binggrae, Lotte Foods, Haitai) grew by 6% compared to the previous year. In the first quarter, sales increased by about 15% compared to the same period last year. Eunju Shim, a researcher at Hana Financial Investment, explained, “Considering last year’s unfavorable weather, a base effect is also expected.”

The ice cream division is also expected to benefit from synergy following the acquisition of Haitai Ice Cream’s business. In October last year, Binggrae acquired 100% of Haitai Ice Cream’s shares for 132.5 billion KRW, reshaping the domestic ice cream market into a duopoly with Lotte (47%) and Binggrae (41%) as the two dominant players. Researcher Eunju Shim said, “Considering the sales scale and operating margin of competitors, there is a high possibility that Haitai’s ice cream division’s margin will improve,” adding, “Synergies between Binggrae and Haitai through improvement of inefficient cost structures are worth expecting.”

This year, Binggrae’s estimated sales and operating profit are 1.0308 trillion KRW and 52.6 billion KRW, respectively, representing growth of 18% and 32% compared to the previous year. Due to the Haitai acquisition effect, entry into the 1 trillion KRW sales club is also expected. Researcher Eunju Shim added, “Considering the increased market dominance in the ice cream market, synergy from profit efficiency, and recovery of convenience store traffic, the performance momentum will become more prominent.”