[Click eStock] "Zero to Seven, Expecting Performance Rebound This Year... Focus on Overseas Market Expansion Results"

Kiwoom Securities analyzed on the 8th that Zero to Seven is expected to see an increase in performance this year due to overseas market achievements and benefits from the rebound in domestic birth rates.

Zero to Seven operates the infant skincare brand ‘Gungjungbichek’ and a packaging business producing POE (Peel-off End) can lids for powder products. As of last year, the sales ratio was 53.8% for the Gungjungbichek segment and 46.2% for the packaging segment.

‘Gungjungbichek’ has entered overseas markets such as China based on its unique natural ingredient-centered formula, ingredient competitiveness, and domestic recognition. POE is supplied to major domestic and international infant formula companies and can manufacturers. In particular, the application items are expanding beyond infant formula to adult nutritional foods, with exports accounting for 59% of total sales as of last year.

Last year’s annual sales were 66.9 billion KRW, down 4% from the previous year, and operating profit was 1.5 billion KRW, down 34%. Oh Hyunjin, a researcher at Kiwoom Securities, analyzed, “The cause of the poor performance was the weak results in the Gungjungbichek segment,” adding, “Especially, export sales decreased by 35% compared to the previous year, with sluggish consumption in China and problems with distributors being the main causes.”

Additionally, costs increased due to proactive investments in entering new markets such as the US Amazon and Japan, which also affected profitability decline. On the other hand, the packaging segment performed well with sales of 30.9 billion KRW, growing 34%. This was due to the expansion of POE applications into other food sectors such as coffee powder and nuts.

Performance is expected to rebound this year. Researcher Oh stated, “This year’s sales are projected to be 80.5 billion KRW and operating profit 6.4 billion KRW, increasing by 20% and 325% respectively compared to the previous year,” and added, “Benefits are expected from achievements in overseas markets as well as the rebound in domestic birth rates.”

In the Gungjungbichek segment, profitability recovery is expected due to the normalization of distribution channels in China and achievements in newly entered countries. Oh said, “In China, retail sales are expected to increase through consumption stimulation policies as well as profitability improvement,” and emphasized, “It is necessary to pay attention to Gungjungbichek’s high competitiveness in infant products, which has obtained Chinese hygiene permits for all major product lineups.” In addition, offline channel entries such as Japan’s Toys "R" Us, Watsons, and Vietnam’s Con Cung are rapidly expanding following online channels like Amazon and Qoo10.

Product portfolio strengthening is also underway. The kids (ages 4?12) line was launched in the second half of 2024, starting domestic sales, and overseas sales channel expansion is planned for 2025. Sun care products for all age groups were renewed and launched in 2024, and CPNP and SCPN registrations for European market entry have been completed.

The packaging segment is expected to continue growth through strong sales of global partner infant formula brands and strengthening its position in the Middle East market. Researcher Oh said, “Since the packaging segment is relatively profitable, it is expected to contribute to the overall company’s operating profit margin increase.”

Meanwhile, Zero to Seven’s stock price showed a sluggish trend due to poor performance and other reasons, but recently, volatility has increased as expectations for policies to solve the low birth rate issue have risen. Regarding this, Researcher Oh stated, “While caution is needed for additional stock price volatility due to policy uncertainties, mid- to long-term corporate value enhancement is possible through benefits from overseas market achievements and the rebound in domestic birth rates this year.”