[Click eStock] "Lotte Je-gwa, Performance Improvement Expected This Year"

Hyundai Motor Securities stated on the 31st that Lotte Confectionery's sales are expected to grow this year, mainly driven by its overseas business units (Kazakhstan, India). However, no investment opinion or target price was provided.

Heeji Ha, a researcher at Hyundai Motor Securities, explained, "The confectionery division is showing synergy effects from price increases and mergers, and the food division is expected to show clear performance improvements in the second half due to easing cost burdens."

Performance improvements are expected across all business units this year. In the case of the confectionery business, this is due to the price normalization measures implemented from last year through March of this year. Researcher Ha predicted, "Performance improvement is expected in the second half due to easing cost burdens, and even considering volume resistance from price normalization, low single-digit sales growth should be easily achievable."

Regarding the food business, Researcher Ha assessed, "This year, performance improvement is expected due to price increase effects, stabilization of raw material prices in the second half, and fixed cost reduction through factory consolidation."

For the overseas business, sales growth is expected to continue mainly in the Kazakhstan, Russia regions, and the Indian subsidiary.

Researcher Ha stated, "In particular, India started the third line of the baked goods division in the first half of 2023 and is investing approximately 70 billion KRW over five years in its ice cream subsidiary Havmore. Once operations begin in March 2024, mid- to long-term growth potential in the Indian market can be secured."

Furthermore, Researcher Ha evaluated that Lotte Confectionery's valuation is low, indicating potential for stock price appreciation. He analyzed, "High overseas sales growth centered on Kazakhstan and India is expected in the future, and this year is anticipated to be the first year showing synergy effects between Lotte Food and Lotte Confectionery."