[Click eStock] "Pulmuone, Overseas Momentum Expected to Revive Next Year"

Q3 Earnings Exceed Consensus
NH Investment & Securities Maintains Pulmuone Target Price at 25,000 Won

[Asia Economy Reporter Gong Byung-sun] Pulmuone posted third-quarter results this year that exceeded market consensus, driven by a turnaround to profitability in its domestic catering sector. The U.S. market, which had been affected by prolonged COVID-19 and soaring maritime freight costs, is expected to regain momentum starting next year.

According to NH Investment & Securities on the 16th, Pulmuone's third-quarter sales this year increased by 9.6% year-on-year to 661.5 billion KRW, and operating profit rose by 11.2% over the same period to 19.5 billion KRW. These figures surpassed consensus estimates by 4.4% and 13%, respectively.

The turnaround to profitability in the domestic catering sector was a positive factor for the results. While new product sales and the processed food segment performed well, new orders in catering increased. Additionally, refunds on airport and rest area rental fees helped the food service and dining-out sectors achieve operating profit profitability.

However, the U.S. subsidiary underperformed. It was unable to meet growing local demand due to a shortage of containers. Furthermore, government unemployment benefit support caused labor supply issues and increased labor costs. Maritime freight costs and inventory disposal losses also expanded, resulting in an operating loss of 4 billion KRW.

Nonetheless, the growth engine of the U.S. subsidiary is expected to revive from next year. The labor cost increase issue due to unemployment benefit payments will be limited starting from the fourth quarter of this year. Pulmuone is also continuously expanding its local production capacity in the U.S. to resolve maritime freight cost issues. Cho Mi-jin, a researcher at NH Investment & Securities, explained, “The U.S. subsidiary’s turnaround to operating profit will revive the company-wide growth momentum.”

Accordingly, NH Investment & Securities maintained its investment opinion of “Buy” on Pulmuone with a target price of 25,000 KRW. The closing price on the previous day was 16,750 KRW.