Melting Ice Cream Stocks... Securities Firms Say "Now Is a Buying Opportunity"

Strong Base Effect from Last Year's Good Performance
High Possibility of Earnings Improvement in Q3

[Asia Economy Reporter Park Jihwan] Although the intense summer heat has officially begun, the stock prices of ice cream companies, traditionally considered beneficiaries, are showing sluggish performance. This is analyzed to reflect the impact of second-quarter earnings that fell short of initial market expectations. However, stock market experts evaluate that as we enter the third quarter, there is a high possibility of performance improvement for ice cream companies, making it necessary to use this as an opportunity for additional purchases.

According to the Korea Exchange on the 16th, Binggrae's stock price fell 1.7% over the past month from the 15th of last month to the day before. Lotte Confectionery and Lotte Food also fell by 3.4% and 0.3%, respectively. This movement is opposite to the KOSPI return, which rose 0.8% during the same period.

Ice cream stocks are classified as representative summer beneficiaries. As the weather gets hotter, sales of main products such as ice cream increase, enjoying a heatwave boom. Especially this year, due to a shorter monsoon season than usual, the heatwave is forecasted to start earlier and last longer than before. External conditions were aligned for the rise in ice cream stocks, but recent stock price trends are moving in the opposite direction. The sluggishness of ice cream stocks was largely influenced by the base effect from last year's strong performance and weak ice cream demand due to frequent rain last month.

In the securities industry, the dominant opinion is that now is the time to buy ice cream companies. Since the direction of profitability improvement has not changed, it is explained that now, ahead of the peak season, is an opportunity to buy. The recent increase in time spent at home due to strengthened social distancing measures amid the fourth wave of COVID-19 is also expected to lead to increased demand for related products such as ice cream.

Han Yujeong, a researcher at Daishin Securities, said regarding Lotte Confectionery, "Due to unfavorable weather conditions compared to last year, ice cream sales temporarily declined by 1% in the second quarter," adding, "However, since this summer is expected to have a short monsoon and continued heatwave, a rebound in the third quarter is anticipated." Lee Kyungshin, a researcher at Hi Investment & Securities, explained, "In the case of Lotte Food's ice cream division, growth was somewhat moderate in the second quarter due to a high base in the same period last year, but additional growth is expected in the third quarter," and added, "Considering that this is a period when the proportion expands due to entering the peak season, it is also positive in terms of operating profit contribution."

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