[Click eStock] "Novarex, Growing Alone Despite Industry Slowdown"

[Asia Economy Reporter Ji-hwan Park] NH Investment & Securities evaluated on the 7th that despite the health functional food market experiencing a slowdown in growth rate this year after a boom early last year, Novarex is showing a stable growth trend.

Jun-ki Baek, a researcher at NH Investment & Securities, stated, "Novarex is growing steadily through expansion and efficiency improvement of production facilities, securing high brand awareness and verified quality, and continuous discovery of individually recognized raw materials."

In particular, the Osong factory, which has received an investment of over 80 billion KRW, will be fully operational starting from the third quarter. The automation rate of the Osong factory is the highest among domestic health functional food production facilities, and it is expected that future sales could reach up to 400 billion KRW. Researcher Baek said, "Operating profit margin is expected to decline until the fourth quarter of this year, but in 2022, as the new factory stabilizes, the cost ratio is expected to improve due to yield enhancement, leading to a rebound."

The health functional food market experienced a boom last year, but growth has somewhat slowed since the third quarter. Although the overall demand for health functional foods, including immune products, has been partially affected by the expansion of vaccination rates, it is still difficult to consider this as a structural demand decline. Researcher Baek said, "Considering that other consumer goods companies (pharmaceuticals, cosmetics, etc.) currently positioning health functional foods as new growth engines and new brands centered on e-commerce are actively entering the market, the company, which operates a business centered on original equipment manufacturing (OEM), is expected to continue stable growth."

Exports delayed due to COVID-19 are also expected to resume next year. Sales to global clients secured before COVID-19 (Amway, Blackmores, Unicity, GNC) are expected to increase significantly. The expected price-earnings ratio (PER) for next year is projected to fall to 10.7 times, indicating sufficient valuation attractiveness.

Thanks to the full effect of the expansion, sales growth of over 20% is expected. Researcher Baek emphasized, "Sales are expected to reach 325.3 billion KRW and operating profit 35.3 billion KRW, an increase of 20.4% and 28.1% respectively compared to the previous year," adding, "Despite the high base, high growth will continue once again."