[Click eStock] "Lotte Wellfood Expected to See Significant Rebound in Operating Profit This Year... Target Price Raised"

On May 12, NH Investment & Securities raised its target price for Lotte Wellfood from 160,000 won to 170,000 won, projecting a strong rebound in this year's operating profit. The investment opinion remains 'Buy'.

Ju Younghoon, an analyst at NH Investment & Securities, stated, "As the company faced increased cost ratios and one-off expenses last year, the base effect is low, so we expect a significant recovery in operating profit this year." He added, "These effects have already started to become evident from the first quarter."

The annual guidance for this year is expected to be comfortably achieved. The analyst said, "Although there will be one-off costs related to voluntary retirement in the second quarter and there are ongoing concerns about increased raw material prices due to the war, annual guidance should be achieved without difficulty." He added, "This should lead to a normalization of valuation."

For the first quarter, Lotte Wellfood's consolidated sales and operating profit reached 1.0273 trillion won (up 5.4% year-on-year) and 35.8 billion won (up 118.4% year-on-year), respectively, both significantly exceeding consensus estimates (the average of securities firms' forecasts). The analyst commented, "While sales were in line with expectations, the substantial improvement in company-wide cost structures was the main driver for beating consensus."

Domestic sales rose 1.7% year-on-year. The analyst explained, "Although the sluggish domestic demand trend continues, sales showed growth thanks to the impact of new products and strengthened marketing." He further noted, "Operating profit increased by 174.3% year-on-year due to cost structure improvements."

Overseas sales grew 17.6% year-on-year, maintaining double-digit growth. The analyst emphasized, "It is particularly encouraging that sales in India, a key market, increased significantly through expanded channel coverage." He added, "The overseas business accounted for as much as 26.3% of consolidated sales in the first quarter, which is a factor for valuation re-rating (reassessment)."

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