[Click eStock] Hyundai Green Food, Continued Benefits from 'The Hyundai' Entry in Dining Sector

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on Hyundai Green Food on the 23rd and raised the target price by 20% to 12,000 KRW. This is based on the judgment that although the business environment of the core meal service sector is challenging, strong growth is expected in the dining-out sector.

It is estimated that the consolidated sales and operating profit for the second quarter reached 824.3 billion KRW and 23 billion KRW, respectively, marking growth of 4.9% and 4.4% compared to the same period last year. Separate sales and operating profit are expected to be 368.7 billion KRW and 12.5 billion KRW, respectively, showing increases of 4.9% and 11.8% year-on-year. Although meal service sales are expected to remain sluggish, dining-out sales are anticipated to grow in double digits due to the effect of entering 'The Hyundai' department store.

Meal service sales are expected to slightly decline as social distancing continues due to COVID-19, leading to an increase in remote work among major clients. Operating margins are also expected to fall compared to a year ago due to sluggish meal consumption. The dining-out sector is expected to show solid growth with the entry of seven dining brands such as 'Itali', 'Joan the Juice', and 'Wine Works' in The Hyundai. Related sales are estimated to be around 8 billion KRW.

Distribution B2C and food ingredient sales are projected to have recorded growth due to the base effect from the previous year and large new orders. Eunju Shim, a researcher at Hana Financial Investment, analyzed, “The combined profit of consolidated subsidiaries is estimated to have remained at last year's level, with Hyundai Livart continuing its performance improvement due to overseas temporary construction orders in Iraq and other countries. However, Everdigm and Hyundai Dream Tour still face burdens from a negative business environment.”

In the second half of the year, the possibility of improving profitability in the core business is limited due to the spread of remote work and sluggish dining-out conditions. However, since the base from the previous year starts to lower from the second quarter and the effect of entering The Hyundai in the dining-out sector may continue, performance is expected to be more comfortable in the second half. Researcher Eunju Shim said, “The current 12-month forward price-to-earnings ratio (PER) is only 11 times, so valuation pressure is limited. However, for mid- to long-term growth, the recovery of core business performance and the realization of synergies with consolidated subsidiaries need to become visible.”