Dongwon F&B, Tuna Price Increase... Lower Start and Higher End Performance Outlook

Hana Securities forecasted on the 1st that Dongwon F&B's tuna fish prices, which had been rising, will turn to a downward trend starting from the third quarter, resulting in a performance pattern of low in the first half and high in the second half.

Sim Eun-joo, a researcher at Hana Securities, stated, “Global fish prices showed an upgraded trend during the COVID-19 pandemic,” adding, “Global fish prices, which were only $1,200 per ton in 2019, recorded $1,340 in 2020 → $1,380 in 2021 → $1,680 in 2022.”

Researcher Sim explained, “The rise in tuna fish prices is mainly attributed to strengthened quarantine measures due to COVID-19 and increased operating costs such as oil prices and labor costs,” and added, “Currently, global longline tuna fish prices are trading at $2,000 per ton, a 14% increase compared to $1,750 per ton at the beginning of the year.”

Sim analyzed, “Considering the seasonality of fish prices (strong just before the FAD ban period), the strong trend is expected to continue until the second quarter in the short term,” and “Considering the recent decline in oil prices, the second half is expected to stabilize.”

Accordingly, he projected that Dongwon F&B will record consolidated sales and operating profit of 1.0137 trillion KRW and 34 billion KRW, respectively, in the first quarter. These figures represent growth of 6.9% and 5.5% compared to the same period last year. Food sales and Dongwon Home Food’s catering sales are expected to increase, and Dongwon Farms’ sales will also rise due to the effect of feed price hikes.

Researcher Sim said, “Annual performance is expected to follow a low in the first half and high in the second half pattern. From the third quarter, the input fish prices are expected to decline compared to the previous year, and the effect of tuna can price increases will be fully realized,” analyzing, “Quarterly profit growth is estimated at 5.5% in Q1, 9.3% in Q2, 18.5% in Q3, and 10.7% in Q4.”

He added, “The current stock price is trading at a 12-month forward price-to-earnings ratio (PER) of 6 times, so valuation pressure is limited,” and “A low-price buying strategy targeting the second half is effective.”