[Click eStock] "Dongwon F&B, High Possibility of Fish Farm Price Decline... Low Price Buying Effective"

Hana Securities maintained a buy rating and a target price of 48,000 KRW for Dongwon F&B on the 6th, stating that low-price buying is effective as earnings growth is expected next year.

Dongwon F&B's consolidated sales for this year are estimated at 4.4071 trillion KRW, up 9.5% from the previous year, and operating profit is estimated at 145.4 billion KRW, an increase of 13.0%.

Sim Eun-joo, a researcher at Hana Securities, explained, "It is positive that the demand is shifting from dining out to home dining recently, making the volume recovery trend in the processed food industry visible. Dongwon F&B is also understood to be showing a visible recovery in frozen food volume while maintaining steady growth in canned tuna volume." She analyzed that as the gift set effect is reflected in the third quarter, if meaningful volume growth is assumed, profit leverage will be possible.

The input fish price in the third quarter is expected to be decided around 2,000 USD, but the input fish price in the fourth quarter is expected to decline compared to the previous quarter. Margin defense is expected to be possible due to the price increase of canned tuna.

Additionally, Dongwon Home Food is expected to contribute to steady sales growth and profit as the issue of high-priced meat inventory purchased has been resolved. Dongwon Farms is also understood to be in a positive state as the deficit has significantly reduced due to the price increase effect in the second half of last year.

Researcher Sim said, "This year, the fish price burden was unusually high, but the global average fish price over the past three years has risen annually from 1,380 USD per ton in 2021 to 1,690 USD in 2022 and 1,930 USD in 2023," adding, "With an average annual increase of 18% over the past two years, it is estimated that Dongwon F&B has incurred a fish price-related burden of around 25 billion KRW each year."

She continued, "Considering seasonality, short-term fish prices are likely to decline," adding, "In fact, the global fish price this week fell 2.0% compared to the previous week, and considering factors such as oil price levels in the mid-to-long term, it is judged that a downward trend is likely to begin, which is a point where solid profit growth is expected next year."

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