[This Week's Food & Beverage] Pulmuone's 'Barun Meokgeori' Grows 70% This Year

Stock Price Soars Amid Trump Tariff War
Effect of U.S. Local Factory Establishment and Acquisitions
Joined the 3 Trillion KRW Club Last Year... Growth Expected to Continue
Unfaithful Disclosure Designation and Convertible Bonds Remain Variables for Corporate Valuation

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Pulmuone's stock price is showing a steep upward trend. It has jumped about 70% this year alone, and market expectations continue to rise. This comes as the company recorded its highest-ever performance last year and forecasts predict significant improvements in its global market performance this year.

According to the Korea Exchange, Pulmuone's stock price rose 69.5% from January this year to the 26th of last month. On the 26th, it reached an intraday high of 19,320 KRW, setting a 52-week high. Institutional and foreign investors are leading the upward trend. Most of the net purchases by institutions and foreigners in February are interpreted as reflecting expectations for K-Food.

K-Food Gains Attention Amid Trump Tariff War

Pulmuone's stock price began to surge on February 4th after U.S. President Donald Trump signed an executive order shortly after his inauguration, imposing an additional 10% tariff on Chinese imports. Amid the tariff war, expectations focused on Pulmuone, which had already been actively expanding into the global market.

Pulmuone established its U.S. subsidiary in 1991 and has since been building factories and acquiring local companies. Currently, as overseas consumers' demand for healthy food grows, profitability is improving, centered on tofu. Pulmuone operates tofu and fresh noodle factories in California on the U.S. West Coast. Additionally, it owns tofu factories in Ayer, Massachusetts on the East Coast, and Tappan, New York.

Pulmuone's main product, tofu, is a refrigerated food item. Local production and distribution are essential for market entry. The focus on "localization" was partly due to cost considerations.

Younghoon Joo, a researcher at NH Investment & Securities, explained, "Pulmuone's main strategy this year is focused on overseas business. In the U.S., where market interest is high, its main products are showing steady growth in the B2C (business-to-consumer) market, and the company plans to actively enter the B2B (business-to-business) market centered on tofu."

He added, "Pulmuone operates local factories in the U.S., so it is free from tariff issues imposed by the Trump administration. Attention should be paid to the increasing proportion of overseas sales, especially centered on the U.S." He also noted, "In Southeast Asia, the focus is on six strategic countries including Singapore and Malaysia. In Europe, demand is currently met through the U.S. subsidiary, but the company plans to establish a local subsidiary within the first half of the year to target the market."

Record-Breaking Performance... Global Business to Grow Further This Year

Pulmuone recorded its highest-ever performance last year. Sales and operating profit increased by 7% and 47% year-on-year to 3.2137 trillion KRW and 91 billion KRW, respectively. This improvement is attributed to growth in food service and distribution with a focus on profitability, despite sluggish domestic food industry conditions, and strong overseas business performance centered on the U.S.

The securities industry expects Pulmuone to continue its growth this year, with overseas business at the core. The Japanese subsidiary expanded tofu bar production facilities at the Kyoda plant in northern Saitama Prefecture to meet demand. Currently, it produces over 2 million products per month. Pulmuone plans to launch a new high-quality tofu product called "Jangin Tofu" next month.

Hana Securities estimates Pulmuone's sales and operating profit for this year at 3.4145 trillion KRW and 109.3 billion KRW, respectively, representing increases of 6.2% and 18.7% compared to last year.

Researcher Eunju Shim of Hana Securities said, "The domestic food service and distribution segment is expected to see steady margin improvement due to expanded orders in relatively high-margin channels such as apartments, military, and senior markets. The combined overseas subsidiaries' profit and loss is expected to turn positive this year, from an operating loss of 6.4 billion KRW in 2024 to a profit of 5 billion KRW."

She added, "In the Americas, the expansion of local production of Asian food is expected to positively impact profitability. In Japan, the portfolio restructuring centered on tofu bars is expected to become visible."

Designated as an Unfaithful Disclosure Corporation, 100 Billion KRW Convertible Bonds... A Variable in Corporate Valuation

Not all news is positive for Pulmuone.

The Korea Exchange recently announced its intention to designate Pulmuone as an unfaithful disclosure corporation. Pulmuone's subsidiary, Pulmuone Foods, held a board meeting on the 12th and resolved to merge its affiliate CD's Associates, but disclosed this six days late. Pulmuone explained this as a simple employee mistake.

Designation as an unfaithful disclosure corporation is a sanction imposed when a listed company fails to fulfill its disclosure obligations faithfully. Depending on the severity, penalties or demerit points may be applied. Accumulated demerit points can lead to trading suspension, designation as a management item, or delisting review. The Korea Exchange will decide on the designation and penalties after review by the Market Disclosure Committee.

In 2023, Pulmuone attracted an investment of 100 billion KRW from Highland Equity Partners (Highland), Kiwoom Private Equity (Kiwoom PE), and Union Asset Management (UAMCO). Approximately 3.5 million shares will be exercisable from September 2024, and about 5.3 million shares from September 2026. If all are exercised, a dilution effect of about 20% will occur, creating valuation pressure.

Hyun-dong Sung, a researcher at KB Securities, commented, "It is regrettable that financial structure improvements such as net debt reduction have not been achieved. If the high financial cost burden continues, the long-term investment attractiveness may decline." Ultimately, it is analyzed that for Pulmuone to sustain growth in the global market, it is essential to strengthen profitability through overseas business expansion while securing financial soundness.