[Click eStock] "Shinsegae Food Proves Business Transformation Through Profitability Improvement"

On May 27, DS Investment & Securities projected that Shinsegae Food would continue its earnings growth trajectory in the second half of the year. The firm maintained its "Buy" investment rating and a target price of 50,000 won.

In the first quarter, Shinsegae Food posted consolidated sales of 358.6 billion won and operating profit of 7.9 billion won. While sales declined by 6% year-on-year, operating profit grew by 70%, highlighting a significant improvement in profitability.

Sales decreased due to several factors: the closure of underperforming group catering sites, the reduction of low-profit B2C channels, withdrawal from inefficient restaurant operations and conversion to directly managed stores, as well as a high base effect from strong imported fruit sales in the previous year. However, profitability improved thanks to tighter control of promotional expenses and an increased proportion of high-margin channels.

Jang Ji-hye, a researcher at DS Investment & Securities, forecast that Shinsegae Food would maintain its earnings growth trend in the second quarter and the second half of the year.

Jang stated, "For 2025, Shinsegae Food is expected to achieve consolidated sales of 1.47 trillion won and operating profit of 34.2 billion won, continuing its profitability improvement."

She explained, "Shinsegae Food is expanding orders centered on high-margin group catering sites. Through the No Brand 2.0 model, which involves opening compact stores of 15 pyeong that can be launched at 60% of the cost of existing outlets in areas with high demand for delivery and takeout, the company is expected to generate business synergies such as expanding ingredient supply."

Jang added, "Despite a sluggish domestic consumption environment and inflationary pressures, Shinsegae Food is strengthening its fundamentals by controlling costs, reducing low-profit businesses, and enhancing manufacturing capabilities. Even based solely on this year's earnings growth momentum, the current share price offers attractive valuation."