[Click e Stocks] "Kyochon F&B Expected to Deliver Results Meeting Q3 Expectations"

[Asia Economy Reporter Song Hwajeong] Hanwha Investment & Securities maintained its 'Buy' rating and a target price of 30,000 KRW for Kyochon F&B on the 13th, expecting the company to achieve results in the third quarter of this year that meet market expectations.

Hanwha Investment & Securities estimated Kyochon F&B's third-quarter sales to increase by 10.8% year-on-year to 124.5 billion KRW, and operating profit to rise by 13.1% to 15.3 billion KRW. Nam Seonghyun, a researcher at Hanwha Investment & Securities, explained, "The basis for expecting positive operating results is the increase in demand due to sports events, seasonal peak season, increased delivery services due to strengthened social distancing, and the continuation of large store conversions and new store openings. Although there was some burden from rising raw material prices in the third quarter, it is positive that operating profit growth is still expected under these business conditions."

Attention should be paid to the increase in sales through distribution channels. In June, Kyochon F&B signed an asset transfer contract with Indulge for the craft beer manufacturing business. The annual production volume is known to be about 2 million liters. Researcher Nam said, "Initially, product supply was mainly carried out through the franchise distribution network, but recently, plans to directly supply to business-to-consumer (B2C) distribution channels to expand economies of scale and new channels are becoming concrete. This is expected to overcome the limitations of the franchise model, expand new sales channels through distribution network expansion, and in the long term, enable supply of home meal replacements (HMR) and some manufactured products," he analyzed. Margin improvement is also expected through the expansion of the metropolitan logistics center and the increase in the proportion of HMR sales.

The stock price decline is seen as a buying opportunity. Researcher Nam said, "Despite the burden of cost ratios, structural growth is occurring, and the expansion of the distribution business division is expected, which is positive."

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