[Click eStock] Declining Growth of SPC Samlip... Target Price Down 32%

Hana Financial Investment Report
Q3 Operating Profit Forecast of 9.1 Billion KRW

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on SPC Samlip on the 21st and set a target price of 78,000 KRW, down 32% from the previous target. This is due to the decline in growth potential and the expectation that the business environment in the second half of the year will be challenging.

SPC Samlip recorded a consolidated operating profit of 9.3 billion KRW, down 44% year-on-year, falling short of market expectations. Pre-tax profit and net profit turned to losses due to the reflection of a Fair Trade Commission fine (29.1 billion KRW) and additional tax assessments from a regular tax audit (3.2 billion KRW).

Main bakery sales slowed in growth compared to the previous quarter due to weak demand in the B2B channel (schools, catering) caused by the impact of COVID-19. Food sales turned to a loss year-on-year due to increased marketing expenses from rising wheat flour costs, the accounting reflection of the lease at Gapyeong rest area, and the launch of a new dining brand (Eggslut). Samlip GFS sales decreased by 5.4% year-on-year due to the impact of COVID-19.

Consolidated sales and operating profit for the third quarter are expected to reach 613.9 billion KRW and 9.1 billion KRW, respectively, representing growth of 1.1% and 290% year-on-year. Considering the one-time cost of 9.4 billion KRW recorded in the third quarter of last year, actual operating profit is judged to decrease by 22.5% year-on-year. Since the B2B channel has a high proportion, the negative impact from COVID-19 is expected to continue in the second half of the year.

However, the decline in profit is expected to slow compared to the previous quarter. Eunju Shim, a researcher at Hana Financial Investment, forecasted, “Traffic at the Gapyeong rest area is rebounding, and the Cheongju and Chungju factories are continuing efforts to reduce costs, so margin improvement is expected in the second half of the year.”

SPC Samlip’s stock price is expected to move within a limited range for the time being. Researcher Eunju Shim said, “The stock price can rebound only when the average selling price (ASP) rises due to mix improvement in the bakery sector and profitability recovery in the food sector such as Milda One. Growth in the top line of Samlip GFS must also be a prerequisite.”

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