[Click eStock] "Dongwon F&B, Strong Q1 Performance... Profitability Improvement Accelerates from Q2 Onward"

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities evaluated that Dongwon F&B's first-quarter earnings met consensus on the 7th, and analyzed that from the second quarter onward, sales in sectors hit by the novel coronavirus infection (COVID-19) will recover, and profitability improvement due to overall cost reduction will be in full swing.

According to NH Investment & Securities, Dongwon F&B's consolidated sales in the first quarter of last year were 783.6 billion KRW, and operating profit was 36.5 billion KRW, increasing by 4.7% and 4.5% respectively compared to the same period last year, delivering results in line with market expectations. By sector, canned tuna grew 5%, HMR 2-3%, dairy products 3-4%, livestock canned products 30%, and refrigerated products over 10% compared to the previous year.

Researcher Jo Mi-jin stated, "Subsidiary Dongwon Home Food (seasoning sauce) recorded approximately 5% growth in both sales and operating profit compared to the same period last year," and added, "Although there was a blow due to the rapid spread of COVID-19 in Korea from March, strong operations in January and February led to overall first-quarter results that were better than concerns." She also analyzed that group catering and ingredient sales each increased by 5% year-on-year, and The Banchan grew over 50%, turning operating profit positive. Sales of Samjo Celtec (sauce company) are B2B-oriented, but since most are large franchises, the impact was limited, and with the effect of capacity expansion, it grew 6% year-on-year despite an unfavorable business environment.

Profitability improvement is expected to be in full swing in the second quarter.

Researcher Jo said, "In the second half of last year, tuna fish prices fell to historically low levels, raising concerns about cost increases, but recently, as oil prices have dropped sharply, the rise in tuna prices is expected to be limited."

She also mentioned that the trend of reducing marketing expenses compared to the previous year will be maintained, and in the case of subsidiary Home Food, with the recovery of catering sales, the effect of capacity expansion of high-margin Samjo Celtec (seasoning sauce), and The Banchan turning profitable, the margin spread is expected to expand going forward.

Accordingly, the investment opinion 'Buy' and target price of 245,000 KRW for Dongwon F&B were maintained respectively.

This content was produced with the assistance of AI translation services.