[Click eStock] "Shinsegae Food to Continue 2Q Earnings Growth Trend"

On the 23rd, IBK Investment & Securities maintained a buy rating and a target price of 58,000 KRW for Shinsegae Food, expecting the company's earnings growth to continue in the second quarter of this year.

Shinsegae Food's second-quarter sales are estimated to reach 379.5 billion KRW, a 7.3% increase compared to the same period last year, and operating profit is expected to rise by 15.8% to 9.9 billion KRW.

Nam Seong-hyun, a researcher at IBK Investment & Securities, explained, "The reason for the positive earnings forecast is the expansion of distribution channels and increase in SKUs within the group, profitability improvement due to a reduction in loss-making sites in the group meal service division, and the expected recovery of business conditions along with the opening of No Brand Burger franchise stores." He added, "Shinsegae Food's earnings improvement is interpreted as the result of structural efforts, as it continues to organize loss-making sites and strives to improve profitability, while the proportion of group companies is gradually decreasing."

A positive aspect of recent earnings is the reduction in the proportion of sales to group company distribution channels. In the first quarter, the proportion within the group was about 38.6%, down 0.2 percentage points compared to the same period last year, and the sales proportion to Emart decreased from 19.5% in the first quarter of 2022 to 17.3%.

Researcher Nam said, "This trend is likely to continue because the company is continuously opening No Brand Burger franchise stores, focusing on expanding sales of general bakery businesses such as Paveik, and continuing to withdraw from loss-making group meal service divisions." He added, "So far, sales to SCK have led overall growth, but since the company is focusing on growth in dining out and food ingredient sales based on bakery competitiveness, the proportion of group companies is expected to decrease further in the future."

He concluded, "We believe the company is focusing on selective concentration in highly competitive business sectors rather than relying on group companies."

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