On the 22nd, IBK Investment & Securities anticipated that Lotte Wellfood's investment sentiment, which had weakened due to raw material prices, would improve following the company's decision to raise product prices. The investment opinion was maintained as 'Buy' with a target price of 150,000 won.
Researcher Kim Taehyun stated, "Despite expectations for strong earnings, Lotte Wellfood's stock price showed weakness starting in March. This is interpreted as a result of rising cocoa futures prices, which have actually increased by 170% from the beginning of this year until April 17."
He added, "Considering that adverse weather conditions and cocoa tree diseases in major production areas such as West Africa and Ghana have not yet been resolved, there appears to be a high possibility of further increases in cocoa prices. However, since cocoa accounts for only about 2% of Lotte Wellfood's raw materials, it is not considered a major concern."
He continued, "The company recently implemented an average price increase of about 12% on 17 types of chocolate products, including Pepero and other confectionery and ice cream items. These price adjustments are expected to be reflected sequentially starting in May, and it is anticipated that the investment sentiment, which had worsened due to cocoa prices, will improve, leading to a clear recovery in the stock price trend."
Furthermore, he noted, "Raw material costs excluding labor expenses increased by approximately 60 billion won last year. Although cocoa input costs are expected to rise further this year, they will be offset by a decrease in dairy product costs, resulting in an increase of only about 10 billion won. Considering the sales growth, the cost of goods sold ratio is expected to be 0.6 percentage points lower than last year."
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