[Click e-Stock] "S&DI Expected to Achieve Another Record-High Q1 Performance... Soaring on Buldak Effect"

On May 8, KB Securities analyzed that S&DI is once again drawing attention in the market as it is expected to achieve record-breaking results, driven by the "Buldak Bokkeum Myeon" effect.

The company's expected results for the first quarter of this year are sales of 35.2 billion KRW and operating profit of 6.6 billion KRW, which represent increases of 48% and 86%, respectively, compared to the same period last year. It appears that S&DI will once again break its quarterly record, following the fourth quarter of last year.

KB Securities researcher Lim Sanguk stated, "Although there is little seasonality, the first quarter is typically an off-season. Nevertheless, sales of Buldak Bokkeum Myeon in the global market continued to grow, and sales of general functional food ingredients (key raw materials for liquid and powder sauces) are estimated to have increased by 45% year-on-year." He also added, "The high operating profit margin trend of around 18% seen in the fourth quarter is expected to continue," offering a positive outlook for profitability.

Despite concerns about the global economy, S&DI is expected to achieve record-high results again in 2025, supported by increased ramen exports and the effects of production expansion. The company continues its co-growth with Samyang Foods by exclusively supplying the key raw materials for liquid and powder seasoning packets in the Buldak Bokkeum Myeon series.

Researcher Lim stated, "The global sales growth of Samyang Foods' Buldak series is leading to co-growth for S&DI, which exclusively supplies the key raw materials for the liquid and powder seasoning packets in Buldak Bokkeum Myeon." He further noted, "The successful entry of Buldak Bokkeum Myeon into major retailers such as Walmart and Costco in the United States, as well as factory expansions, are expected to drive future sales growth. Despite concerns about tariffs, favorable exchange rates and anticipated price increases are also positive factors."

In this regard, on December 3, 2024, S&DI invested 16 billion KRW in factory expansion and production facilities. Compared to the existing factory, production capacity is expected to increase by approximately 25% to 30%, and the effects of this expansion are expected to be fully reflected from the third quarter onward.

The general functional food ingredient business is also preparing a new growth engine. The company is diversifying its business by shifting from a B2B focus to B2C and developing its own brands. By launching high value-added ready-to-eat meals and seasonings as finished products, S&DI is expected to respond quickly to changing market trends.

Researcher Lim evaluated, "For general functional food ingredients, business diversification such as shifting from B2B to finished product-centered B2C and pursuing proprietary branding will be the next growth momentum."

S&DI also has a very solid financial structure. As of the end of last year, its retained earnings ratio was 3,253%, return on equity (ROE) was 25%, it held approximately 36.5 billion KRW in cash and equivalents, and maintained a debt-free management policy. Accordingly, expectations for further enhancement of corporate value are rising.

Currently, the stock is trading at a price-to-earnings ratio (P/E) of 12.2 times based on the expected results for 2025, which is significantly discounted compared to its major customer Samyang Foods' P/E of 20.8 times.