[Click eStock] SPC Samlip Expected to Achieve Record High Operating Profit This Year

Shinhan Investment Corp. announced on the 4th that it maintains a 'Buy' rating and a target price of 100,000 KRW for SPC Samlip. The upside potential compared to the previous day's closing price (68,600 KRW) is 45.8%. This is based on the judgment that margin spread improvement will begin in earnest from the second quarter of this year, leading to the highest operating profit this year due to the strong performance of the bakery and food businesses.

Despite the high base from last year's launch of Pokemon Bread, bakery sales are expected to increase by 7.6% this year, showing favorable growth. Pokemon Bread regularly releases seasonal products, and a 15% sales growth is expected this year as well. It is analyzed that due to the recent economic downturn, there is high expectation for sales growth of mass-produced bread, which is relatively lower in price. Despite two price increases over the past two years, the strong price competitiveness and long-established brand power are expected to stand out as major strengths amid the current high uncertainty.

Recovery of the brand and rest area performance, which had been in deficit for the past three years, is also anticipated. With the reopening leading to increased traffic, it is judged that the company is on the verge of turning an annual profit (4.2 billion KRW).

In the food sector, the focus this year is on expanding market share in the business-to-consumer (B2C) segment to strengthen competitiveness. In particular, expanding the number of SKUs sold in convenience stores is expected to drive sales. The distribution business plans to focus on nurturing high value-added core businesses.

Another positive factor is the gradual easing of cost burdens due to the decline in major grain prices since the second half of last year. Considering the lagging effect and the strong dollar, cost burdens were unavoidable until the fourth quarter of last year, but it is judged that stability has been reached since the first quarter of this year. The previously heavy burdens of wheat and palm oil have already returned to pre-surge levels, so from the second quarter of this year, the company can benefit from margin spread improvements due to product price increases and grain price declines.

Researcher Jo Sang-hoon of Shinhan Investment Corp. emphasized, "The bakery business can achieve the highest-ever operating profit this year thanks to price increases and efforts to cultivate mega brands, and the food business will benefit from category and online channel expansion." He added, "With the reopening, recovery of the brand and rest area performance, which had been sluggish for the past three years, is expected."