[Click eStock] "Shinsegae Food to Continue Performance Improvement Next Year"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 140,000 KRW on Shinsegae Food on the 30th. This is based on the judgment that the performance momentum could continue next year due to the expansion of the 'No Brand Burger' franchise business.

In the third quarter, consolidated sales and operating profit were 343.2 billion KRW and 6.4 billion KRW respectively, growing 6.9% and 14.8% compared to the same period last year. Although the third quarter showed a slight decrease compared to the second quarter due to fewer operating days, it demonstrated significant growth year-on-year. This is analyzed to be due to a reduction in losses in the dining-out sector and increased profits from bakery manufacturing. The number of No Brand Burger franchise stores exceeded 100 as of last month and is expected to expand to 120 by the end of the year.

Sim Eunju, a researcher at Hana Financial Investment, analyzed, “As franchise sales remained steady, manufacturing sales also showed concurrent growth, with third-quarter manufacturing sales increasing by 15.8%. The bakery segment is showing balanced growth in sales and profits by linking with early morning delivery.” Meanwhile, Starbucks-related sales showed a 24.3% increase year-to-date in the third quarter compared to the same period last year.

Shinsegae is expected to see profit leverage fully materialize next year from royalty income related to No Brand Burger and increased operating rates of manufacturing plants (for hamburger buns, patties, lettuce, etc.). Accordingly, the profit contribution of the No Brand Burger franchise business is estimated to rise from 10% this year to 26% next year.

The alternative meat business also appears to be progressing smoothly. In July, alternative meat-related sandwiches were launched at Starbucks, and it is expected to expand sales channels into B2C by broadening the portfolio to include ham and sausages in the future.

The company's consolidated sales and operating profit for next year are estimated at 1.43 trillion KRW and 35.6 billion KRW respectively, representing growth of 7.7% and 36% compared to the same period last year. Existing business units such as catering and dining, which had been sluggish due to minimum wage increases and COVID-19, are showing meaningful profitability recovery through internal restructuring. Researcher Sim stated, “As No Brand Burger franchise sales steadily increase, manufacturing sales and profitability are also expected to improve.”

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