[Click eStock] "Dongwon F&B Faces Short-Term Cost Burden Due to Rising Costs"

Hi Investment & Securities Report

[Asia Economy Reporter Minji Lee] Hi Investment & Securities maintained a buy rating and a target price of 280,000 KRW for Dongwon F&B on the 30th. This is based on the judgment that the burden from cost pressures is expected to offset the recovery in the dining-out market trend.

For the first quarter, Dongwon F&B's consolidated sales and operating profit are expected to be 887.6 billion KRW and 41.5 billion KRW, respectively. Sales are projected to increase by 7%, while operating profit is expected to decline by 7%. Growth in Dongwon Home Food’s food ingredients and online livestock wholesale sectors, along with steady performance of key products within the food division, will drive top-line growth. However, cost burdens from rising raw material prices and exchange rates are anticipated to be reflected.

In general food products, stable sales flow in key products and growth categories such as HMR (Home Meal Replacement), along with price increases, are expected to contribute to sales growth. However, it is necessary to keep open the possibility of margin pressure due to rising prices of raw materials like tuna, pork, and packaging materials, as well as exchange rate increases.

Researcher Kyungshin Lee of Hi Investment & Securities analyzed, “The elevated cost levels will be reflected through the first half of this year. In the case of dairy products, the average 6% price increase implemented in the fourth quarter of last year appears to have completed the top-line growth, but stabilization of cost increases for cheese and powdered milk is needed.” Future operating performance is expected to be influenced by the recovery of offline channels and the market acceptance of product price increases.

In the seasoning distribution sector, the trend of expanding B2B sales in meat, food ingredients, and seasoning sauces is expected to continue. Since the recovery of external variables related to dining-out channels and operating performance trends follow the same trajectory, the recovery trend is judged to be meaningful.

Researcher Lee said, “With the added effect of imported meat processing and distribution companies like Sejung, top-line growth will accelerate. However, considering the possibility that some burden related to cost increases will be reflected, the short-term focus will be more on scale rather than profitability.”

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