[Click eStock] "'Owner Risk' SPC Samlip, Oversold Phase... Target Price Maintained"

Stock Price Decline Due to Profitability Slump and Internal Issues Since Last Year
Operating Profit Expected to Grow Around 10% This Year
1Q Operating Profit Forecasted to Slightly Miss Consensus

On the 4th, IBK Investment & Securities maintained a 'Buy' rating and a target price of 80,000 KRW for SPC Samlip, citing an oversold phase. The previous closing price of SPC Samlip was 59,800 KRW. SPC Samlip is an affiliate of the SPC Group. Recently, owner risk has been highlighted as SPC Group Chairman Heo Young-in was arrested on charges of coercing union members to withdraw from the union, leading to a general decline in stock prices across SPC Group affiliates.

Kim Tae-hyun, a researcher at IBK Investment & Securities, stated, "Since the second half of last year, the stock price adjustment has been larger than the industry average due to profitability decline and internal issues." He added, "Although concerns remain this year regarding bakery baseline burdens and delayed recovery of distribution profitability, a 10% level growth in operating profit is expected due to a decrease in cost ratio." Furthermore, sales of refrigerated and frozen dough through B2B and B2C channels are expected to more than double compared to last year (approximately 15 billion KRW) in the second half of the year.

Additionally, with the completion of the expansion construction of the Siwha Center in December, new sales of about 100 billion KRW are anticipated next year. The introduction of factory automation equipment is also expected to improve profitability. Researcher Kim said, "Considering the momentum, the stock price recovery is expected to gain strength as we move into the second half of the year."

SPC Samlip's consolidated sales and operating profit for the first quarter are estimated at 815.3 billion KRW and 17.9 billion KRW, respectively. These figures are expected to fall short of the consensus (market average forecast) of 882.2 billion KRW in sales and 19.1 billion KRW in operating profit. By segment, bakery sales are projected at 221.1 billion KRW with an operating profit of 16.6 billion KRW. There is a baseline burden from last year's popular Pok?mon bread sales. However, operating margin is expected to rise by 0.4 percentage points due to a decrease in input costs.

In distribution, a sales gap occurred after the decision to withdraw from the Chinese (Shanghai SPC Trading Co., Ltd.) food ingredient distribution business in November last year for profitability reasons. Margin rates are expected to improve slightly due to the reduction of low-profit clients. In the food segment, although the cost of wheat purchases has decreased, costs for meat processing and fresh foods remain high, limiting performance expectations. It has also been confirmed that rest area operation costs continue to rise.