[Click e-Stock] Binggrae Misses Q1 Expectations Amid Weak Domestic Demand

On April 24, IBK Investment & Securities predicted that Binggrae’s first-quarter earnings would fall short of market expectations. However, the company forecasted that annual operating profit would increase as the effects of price hikes are reflected.

Binggrae’s first-quarter sales are estimated at KRW 301.8 billion, up 0.3% year-on-year, while operating profit for the same period is projected at KRW 15.7 billion, down 25.4% from a year earlier.

Kim Taehyun, a researcher at IBK Investment & Securities, explained, “In addition to the contraction in domestic consumption, the increase in prices of key raw materials such as cocoa and coffee, as well as higher labor and logistics costs, are the main reasons. The high base effect from the first quarter of last year is also a significant factor in the profit decline.”

By business segment, sales of most products in the domestic market?including white milk, yogurt, and juice?remain sluggish, and exports to China are also weak. As a result, refrigerated product sales are expected to decrease by 2.9% year-on-year to KRW 148.6 billion. Frozen product sales are estimated to increase by 3.4% year-on-year to KRW 127.6 billion, as ice cream sales show slight improvement and sales of room-temperature coffee and The Danbaek products are expected to perform well.

Although Binggrae is not expected to meet market forecasts for the first quarter, annual operating profit is likely to improve.

Kim noted, “Weather during the peak season in the second and third quarters may act as a variable, but with the effect of price increases, annual operating profit is projected to rise by 5.8%.”

He added, “Along with the upward trend in dividends per share, the recently decided cancellation of treasury shares is interpreted as a positive signal showing the company’s intent to expand shareholder returns. We maintain our previous buy rating andtarget price of KRW 120,000.