Somewhat sluggish in the first half... Strengthening fundamentals and improving structure
Stabilizing various costs... Expectation of performance recovery through expansion
[Asia Economy Reporter Minwoo Lee] There is an analysis that Pulmuone is going through a transitional period of structural improvement. Through this, the company's own fundamental conditions are expected to become even more robust.
On the 21st, Ebest Investment & Securities maintained its 'Buy' rating on Pulmuone based on this background. However, the target price was lowered by 21.4% to 22,000 KRW. The previous trading day's closing price was 16,900 KRW.
Ebest Investment & Securities forecast that Pulmuone will record consolidated sales of 647 billion KRW and operating profit of 20.6 billion KRW in the third quarter of this year. This represents increases of 7.2% and 17.2%, respectively, compared to the same period last year.
In the domestic food sector, an overall negative base effect appeared in the first half of this year. Sales were similar to those in 2019, and operating profit levels improved. Recently, Pulmuone launched many new products in the plant-based protein market and also raised prices. Regarding bottled water, it was incorporated in February this year, so an inclusion effect compared to last year is expected.
The domestic catering and dining-out sectors are also recovering. In the F&C (Food & Culture) division, catering accounts for about half of sales, rest areas about the low 30% range, and concessions about 15%. Therefore, compared to last year's leading groups, normalization took relatively more time. Nevertheless, due to significant progress in business structure improvement like Foodmus, the deficit size drastically decreased from 7.2 billion KRW in the second quarter of last year to 700 million KRW.
Researcher Jihyun Shim of Ebest Investment & Securities said, "Regarding captive contracts for group catering, it is understood that many large contracts with Samsung affiliates, POSCO, and others were secured in the first half of this year," adding, "Since these contracts have a structure where sales increase as the number of work-from-home days decreases, as the domestic economy normalizes (reopening), the catering and dining-out sectors are expected to recover significantly."
Structural improvements are underway in the overseas division. Since the end of last year, as part of strategically promoted profitability improvement efforts, there has been an effect of apparent reduction in scale. Although one-time costs in the export sector were reflected, structurally profitability improved, but the overall overseas division profits appeared sluggish in the first half. This includes one-time labor costs resulting from logistics expenses and labor shortages. Also, costs related to the Korea Ethnic division's transition from wholesale to direct sales are expected to stabilize from the second half. The tofu division is also expected to reduce costs by switching to local production from the second half. Expansion of each product is planned in Japan and China regions.
Researcher Shim analyzed, "As a result of continued overall structural improvements, the company's own fundamentals have become even more robust," adding, "Although third-quarter earnings may slightly underperform expectations due to transitional overseas business expenses and somewhat delayed reopening phases, once performance recovery from structural improvements is confirmed, the stock price upside will reopen."
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