[Click eStock] "Kyochon F&B, Profitability Improvement through Direct Management Conversion... Target Price Up 20%"

Target Price Raised from 10,000 Won to 12,000 Won
Sales Declined Due to One-Time Costs but Outlook Remains Positive
Profitability Expected to Improve with Completion of Direct Management Transition

On the 25th, Eugene Investment & Securities maintained a 'Buy' rating on Kyochon F&B, expecting profitability improvement, and raised the target price by 20% from 10,000 KRW to 12,000 KRW. Kyochon F&B closed at 9,670 KRW on the previous trading day.

Screenshot of the Kyochon F&B homepage

Jongseon Park, a researcher at Eugene Investment & Securities, stated, "We believe that completing the direct management transition of franchise regional headquarters will positively impact both sales growth and profitability improvement. To recover the undervalued corporate value and enhance management efficiency, we have been actively promoting the direct management transition of franchise regional headquarters since the second quarter. We succeeded in converting 16 headquarters in the second quarter and plan to convert the remaining 7 franchise regional headquarters in the third quarter," he said. Researcher Park added, "Through the direct management of franchise regional headquarters, sales growth and profitability improvement are expected compared to the previous year."

Kyochon F&B maintained sales growth due to the promotion of direct management transition of franchise regional headquarters, but operating profit turned to a loss. Sales amounted to 111.4 billion KRW, and operating loss was 4.9 billion KRW. Compared to the same period last year, sales increased by 9.2%, but operating profit is expected to turn significantly negative. Operating loss is expected to fall short of market expectations (sales of 108.3 billion KRW, operating loss of 2.7 billion KRW).

Researcher Park explained, "Although sales showed growth compared to the same period last year, the significant operating loss was due to one-time direct management transition costs and increased administrative expenses related to the direct management transition of franchise regional headquarters. As of the end of March, among 23 franchise regional headquarters nationwide, 16 were converted to direct management in the second quarter, resulting in approximately 16 billion KRW in additional costs," he said.