Food Stocks Rose Despite Eggflation Fears... Why Are Target Prices Being Revised Downward?

Increased Market Dominance of Nongshim and Others ↑
Reduced Raw Material Cost Burden for Orion and Others ↓

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Despite the fear of agflation (agflation: a sharp rise in grain and agricultural product prices), securities firms have been lowering their target prices one after another for food stocks, which had been soaring. This is because a polarization phenomenon is occurring where companies with strong market dominance among food stocks see their stock prices rise, while those without such dominance continue to struggle.

Due to the war between Russia and Ukraine, grain prices have soared, increasing cost burdens for food companies, yet stock prices have steadily risen. A representative company is CJ CheilJedang. CJ CheilJedang hit a low of 337,500 KRW on the closing price of March 15, then successfully rebounded, maintaining an upward trend to close at 392,000 KRW on April 7. Nongshim also recorded a low of 280,500 KRW on March 15, then rebounded and steadily trended upward, closing at 317,000 KRW the previous day.

Jang Ji-hye, a researcher at DS Investment & Securities, analyzed, "Leading companies such as those in ramen and soju have low market share volatility and strong pricing power despite cost burdens."

Conversely, some food companies have seen their target prices lowered by securities firms. Hana Financial Investment lowered the target price for Shinsegae Food from 140,000 KRW to 110,000 KRW on April 6.

Sim Eun-joo, a researcher at Hana Financial Investment, explained, "The first quarter is a seasonal off-season, but unfavorable business conditions and the burden of raw material price surges from late last year to early this year negatively impacted performance. Additionally, the slower-than-expected pace of new business expansion was reflected in the downward adjustment of the stock price."

Orion’s target price outlook is also not bright among food stocks. NH Investment & Securities lowered Orion’s target price from 160,000 KRW to 140,000 KRW, and Hana Financial Investment lowered it from 170,000 KRW to 115,000 KRW.

Jo Mi-jin, a researcher at NH Investment & Securities, analyzed, "The target price was lowered reflecting the resurgence of COVID-19 in China and the poor performance of the Russian subsidiary due to the ruble depreciation."

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