[Click eStock] "From Entering the Beer Business to Increasing Holidays... Kyochon F&B Expected to Shine in the Second Half"

2Q Highest Sales Expected
Multiple Tailwinds in Second Half... Increased Potential for Further Growth

[Asia Economy Reporter Minwoo Lee] Kyochon F&B is expected to achieve its highest quarterly sales in the second quarter of this year. Analysis suggests that sales growth will be further possible in the second half of the year, supported by entry into the craft beer business and an increase in the number of holidays.

On the 15th, Eugene Investment & Securities forecasted that Kyochon F&B would record consolidated sales of 127.2 billion KRW and operating profit of 7.9 billion KRW in the second quarter of this year. This represents an increase of 15.6% and 35.7%, respectively, compared to the same period last year. It is expected to improve profitability compared to the same period last year while achieving the highest quarterly sales. Due to temporary expenses (selling and administrative expenses related to the 30th anniversary advertisement and golf tournament sponsorship), the profit margin is expected to slightly decrease compared to the previous quarter.

In the second half of the year, while these expenses decrease, profitability is expected to improve thanks to new businesses and economic recovery. First, the craft beer business is considered a positive factor. An asset transfer contract for this was signed in early May. It is analyzed that they will develop differentiated craft beer and aim for synergy effects with the existing franchise business. Researcher Jongseon Park of Eugene Investment & Securities explained, "With the revision of the Liquor Tax Act allowing alcohol delivery, it will be launched in canned beer form," adding, "We have secured an annual production base of 200 liters and will start sales from the second half of the year."

Expansion of medium-to-large stores and overseas franchises will also be actively promoted in the second half. They are pushing to expand new specialty stores tailored to unique commercial districts, and the proportion of medium-to-large stores has already increased from 52% in 2018 to about 71% this year. The number of overseas stores also increased from 18 in 2018 to 47 across 6 countries by the end of the first quarter this year. The goal is set to exceed 500 stores in 25 countries by 2025. They plan to make a full-scale entry into the Middle East region through a master franchise agreement.

The full implementation of substitute holidays, which increased the number of holidays, is also a positive factor. In addition, events such as the Tokyo Olympics in Japan, held from the 23rd of this month to the 8th of next month, are expected to contribute to sales expansion.

Against this backdrop, Eugene Investment & Securities maintained a target price of 26,000 KRW and a 'Buy' investment rating for Kyochon F&B. The closing price the previous day was 21,100 KRW. Researcher Park explained, "The current stock price is trading at a price-to-earnings ratio (PER) of 14.8 times based on the expected 2021 earnings, which is discounted compared to the average PER of 18.4 times for domestic similar and peer companies such as Dongwon F&B, Pulmuone, Mom's Touch, and Wooyang," adding, "There is an upside potential of 23.2% from the current stock price."

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