[Click e-Stock] "When Cocoa Prices Fall, Choose Lotte Wellfood"

On November 21, Korea Investment & Securities forecast that Lotte Wellfood will achieve gradual profitability improvement due to the decline in cocoa prices. The target price of 170,000 won and the buy rating were both maintained.

Kang Eunji, a researcher at Korea Investment & Securities, stated, "As of the closing price on November 19, the price of cocoa fell by 6.1% from the previous day to $4,943, dropping below $5,000 per ton for the first time since February 2024." She explained, "This is due to expectations of increased supply from a bumper cocoa crop in West Africa and concerns among global chocolate companies about declining chocolate demand, as chocolate prices have been raised several times."

Researcher Kang identified Lotte Wellfood as the domestic confectionery company likely to see the greatest margin expansion from falling cocoa prices.

She elaborated, "As of 2024, Lotte Wellfood holds a 37.2% market share in the domestic chocolate market, making it the leading player in Korea. About 30.0% of its domestic confectionery sales come from chocolate products." She reiterated, "As of 2024, Lotte Wellfood holds a 37.2% share of the domestic chocolate market, and about 30.0% of its domestic confectionery sales are from chocolate products."

She added, "Considering the current cocoa inventory situation and the impact of price increases, we expect to see a narrowing of the decline in operating profit in the third quarter, followed by a gradual improvement in profitability starting from the fourth quarter."

She further commented, "If cocoa prices surge in the future, the use of cocoa butter substitutes may once again come to the forefront as a response, so there is unlikely to be significant upward pressure on cocoa prices."

Kang also explained that the growth trajectory of Lotte Wellfood's Indian dry and frozen confectionery subsidiaries, which are key mid- to long-term investment points, remains unchanged.

She said, "The Pune frozen confectionery plant is expected to contribute to earnings growth in earnest starting from the peak season in 2026, following a period of production stabilization this year. The first overseas production line for Pepero began operations in July this year, and Choco Pie continues to operate at over 90% capacity even after the third production line was launched, so further earnings growth is expected through additional line expansions."

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