[Click eStock] "Shinsegae Food's Sale of Group Catering Division a Wise Move to Strengthen Capabilities"

On September 1, IBK Investment & Securities assessed that Shinsegae Food has gained the ability to focus strategically by selling off its group catering division.

On August 28, Shinsegae Food announced through a public disclosure that it would sell its group catering division. The total sale amount is reported to be around 120 billion won, with the buyer being Gourmet Galleria (Hanwha Hotels & Resorts). As of 2024, the group catering division recorded annual sales of approximately 275 billion won, accounting for about 18% of the company’s total sales. The operating margin stands at around 3 to 4%.

Nam Sung-hyun, a researcher at IBK Investment & Securities, judged the sale of the group catering division to be a rational decision. He cited several reasons: the division’s declining importance within the group amid intensifying external competition; the high likelihood that growth, which had been sustained through price increases over several years, would slow down; the necessity for large-scale investment to secure competitiveness over the mid- to long-term; and the limited synergy with existing business units.

Researcher Nam believes that by selling the group catering division, Shinsegae Food will be able to secure investment assets and focus strategically. He explained, “If this sale is completed, Shinsegae Food will receive funds amounting to 120 billion won. Although annual profits will decrease by 9 to 10 billion won, the influx of cash assets will allow the company to secure investment assets.”

He added, “Shinsegae Food is building manufacturing competitiveness in the system bakery sector and is pursuing a strategy to increase the proportion of sales to general businesses through par-baked (rapidly frozen bread) products. In the mid- to long-term, differentiated bakery supply capabilities will become a key factor in the cafeteria food materials market.”

Researcher Nam stated, “If Shinsegae Food expands its infrastructure and competitiveness by securing investment funds, it will be able to establish a differentiated position. This sale should be viewed as a cornerstone for the mid- to long-term restructuring of business units, rather than a temporary decrease in profits.” He maintained a ‘Buy’ investment opinion and a target share price of 58,000 won.