IBK Securities projected on the 17th that KYOCHON F&B's profit for the second quarter of this year will grow. An analysis suggests that KYOCHON F&B, which operates a franchise business, will benefit from the additional budget allocation for the second half of the year (livelihood recovery support funds). The investment opinion is "buy", and the target stock price remains at 6,250 won. The closing price of KYOCHON F&B on the previous trading day was 5,480 won.
In the first quarter of this year, KYOCHON F&B's performance fell short of market estimates. The revenue reached 124.6 billion won, growing 10% compared to the same period last year due to increased demand and a transformation in the distribution structure stemming from the conversion to regional headquarters, but the operating profit recorded a decrease of 10.4% to 10.7 billion won due to rising expenses.
However, projections indicate that profit growth will resume from the second quarter, and the potential for improved business conditions due to the supplementary budget for the second half is expected to accelerate. During the emergency disaster support payment in 2020 and the COVID-19 coexistence national support payment in 2021, these funds were predominantly used in restaurants and grocery stores. According to IBK Securities, the proportion of restaurant usage during that period was 24.8% and 22.4%, respectively.
Nam Seong-hyun, a researcher at IBK Securities, noted, "Considering that the proportion of dining in was high due to gathering restrictions in 2021, it is anticipated that this supplementary budget allocation will predominantly be used in restaurants," adding, "Since KYOCHON F&B operates a franchise business, the impact of the supplementary budget is expected to be significant."
Additionally, the possibility of extra one-time expenses due to the end of sports event sponsorship and labor costs and provisions is low, and the profit leverage and effects from new menu items as they enter the seasonal peak are likely to continue.
Nam stated, "The second quarter has seen high fixed expenses due to sports sponsorship over the past decade, but sponsorship has ended starting this year," adding, "With the completion of the conversion to regional headquarters, revenue and profit growth is anticipated."
As a result, IBK Securities estimated KYOCHON F&B's second-quarter revenue at 126.6 billion won, a growth of 11.2% compared to the same period last year, with operating profit estimated at 12.9 billion won.