Food and Beverage Stocks Expected to Regain Investment Appeal Toward Year-End

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities maintained a 'Positive' investment opinion on food and beverage stocks on the 30th, expecting their investment appeal to increase toward the end of the year.

Jomi Jin, a researcher at NH Investment & Securities, said, "Although a decline in third-quarter earnings is expected, even considering this, the stock price adjustment phase is excessive. Considering the subsequent trends in prices, demand, and costs, profitability recovery is possible, and overseas growth rates are also highlighted, so investment appeal is expected to rebound toward the end of the year." International grain prices are expected to shift to a downward trend in the fourth quarter, and the mid- to long-term profit spread due to cost burden pass-through to prices is also expected to improve. Researcher Jo explained, "The second quarter is the lowest point in earnings, and the negative base effect is expected to end after the third quarter, so now is the time to focus on the recovery of year-end earnings and stock price momentum."

Concerns about the third-quarter earnings decline of food and beverage companies have already been reflected in stock prices. NH Investment & Securities estimated that the combined sales of 15 major food and beverage companies in the third quarter increased by 4.3% year-on-year to 16.1815 trillion KRW, while operating profit decreased by 1.5% to 1.3293 trillion KRW. Researcher Jo said, "Quarterly operating profit is expected to rebound with a 15.2% increase compared to the previous quarter," adding, "By company, Lotte Chilsung is expected to record strong earnings exceeding the third-quarter consensus operating profit."

NH Investment & Securities maintained a positive view on CJ CheilJedang and Orion. Researcher Jo said, "CJ CheilJedang's price-to-earnings ratio (PER) is 9 times, which is too low even considering the downward revision of third-quarter earnings expectations. Since concerns about the third quarter have been raised after the second-quarter earnings announcement, a stock price rebound is possible after the third quarter." Orion is expected to continue its earnings growth trend until next year due to price increases and internal restructuring effects. Researcher Jo added, "Above all, both companies are representative consumer goods companies of South Korea, and mid- to long-term growth and performance in overseas markets are expected."

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