[Click eStock] "Kooksoondang Achieves Operating Profit Over 10 Billion Won for the First Time in 12 Years... BUT Stock Price is Undervalued"

[Asia Economy Reporter Ji-hwan Park] NH Investment & Securities evaluated that although Kooksoondang is expected to achieve operating profit in the 10 billion KRW range for the first time in 12 years, its stock price remains excessively undervalued.

Kooksoondang is a leading domestic manufacturer of Makgeolli and Yakju. With the improvement in the headquarters' operating performance due to the price increase of Makgeolli, it is expected to achieve operating profit in the 10 billion KRW range for the first time in 12 years in 2022. Furthermore, considering investment asset value exceeding 120 billion KRW and cash equivalents of 43.2 billion KRW, it is analyzed that the stock is excessively undervalued.

In particular, last year, it was expected to achieve operating profit in the 10 billion KRW range for the first time in 12 years. After operating losses from 2015 to 2019, Kooksoondang recorded an operating profit of 4.6 billion KRW in 2020, successfully turning around. Baek Jun-gi, a researcher at NH Investment & Securities, explained, "This year, operating profit is expected to exceed 13 billion KRW. While the 2020 turnaround was due to cost reduction, the profit growth in 2022 is based on fundamental performance improvements such as price increases and export expansion."

In June 2021, the main product ‘Kooksoondang Saeng Makgeolli’ was renewed with a price increase, and in December, the supply price of ‘Kooksoondang Rice Makgeolli’ was raised by 25%, from 1,040 KRW to 1,300 KRW. Price increases for other products following the main products are also expected in 2022. Researcher Baek said, "Regarding exports, the sales proportion of ‘Prebio Makgeolli’ in Japan recently surged to 40%," and added, "Export countries are diversifying beyond the existing major markets of the United States and China." He emphasized, "The export ratio was only 7% in 2014 but rose to 18% as of the third quarter of 2021," and "As of 2020, Kooksoondang accounted for 57% of domestic Makgeolli export volume."

Attention should also be paid to the value of Kooksoondang’s non-operating assets. Kooksoondang’s investment asset value is currently similar to its market capitalization, with major consolidated subsidiaries including G&Tech Venture Investment (VC) and affiliates such as Farmate (Smart Farm). He said, "When combining non-operating assets such as cash equivalents (43.2 billion KRW), financial assets (47.8 billion KRW), and investment real estate (19.3 billion KRW), the book value of investment assets amounts to 153.3 billion KRW. This year’s sales are expected to be 73.5 billion KRW, up 13.7% year-on-year, and operating profit is expected to increase by 34.5% to 13.4 billion KRW." The forecasted price-earnings ratio (PER) for this year is 9.2 times, highlighting its undervaluation appeal compared to other liquor companies.