[Click eStock] "Pulmuone, Overseas Business Turnaround Expected"

Shinhan Financial Investment Report

[Asia Economy Reporter Minji Lee] Shinhan Financial Investment maintained its buy rating and target price of 21,000 KRW for Pulmuone on the 26th. This is based on the judgment that losses are decreasing due to improvements in the product mix and channel expansion efforts in the overseas business division.

In the second quarter, Pulmuone is estimated to record sales and operating profit of 712.5 billion KRW and 12.4 billion KRW respectively, representing growth of 12.2% and 34.1% compared to the same period last year. Although the performance is mixed with positive factors such as strong domestic processed food sales and reopening, and negative factors such as cost burdens and increased maritime shipping costs, it is expected to sufficiently exceed the lowered market expectations.

However, the continued operating losses in the overseas business remain a burden. Sales in the US and China are expected to increase by 34% and 39% respectively due to changes in product mix and channel expansion, but losses are predicted to continue due to insufficient local production in the US and increased maritime shipping costs. The annual operating loss is expected to decrease to 15 billion KRW from last year's operating loss of 26.5 billion KRW.

With the global increase in interest in the plant-based protein market, product demand is expected to steadily grow. Last year's poor performance in overseas markets was due to supply shortages rather than demand, which is expected to be resolved over the next three years through efforts to expand US production capacity.

Researcher Sanghoon Cho of Shinhan Financial Investment said, “We expanded the tofu factory in the US last year, and expansions of the Asian food factory this year and the Eastern region tofu factory next year are planned,” adding, “This will respond to local tofu demand in the US and gradually alleviate maritime shipping costs.” Researcher Cho also analyzed, “Various efforts in terms of ESG for sustainable growth will further highlight the company's non-financial competitiveness.”