Hyundai Motor Securities on the 9th said Pulmuone is expected to improve profitability on the back of sales growth at overseas subsidiaries, including the United States and China. It initiated coverage with a "Buy" rating and a target price of 160,000 won. Pulmuone's closing price in the previous session was 12,030 won.
In the fourth quarter of last year, Pulmuone's sales on a consolidation basis rose 5% on-year to 859.2 billion won, while operating profit fell 6.6% to 34.3 billion won.
Hyundai Motor Securities analyzed that business-to-consumer (B2C) transactions between domestic corporations and consumers and the performance of subsidiaries in the United States and China showed a solid trend. However, it said heightened competition in the Pulmuone Saemmul water business reduced some profitability.
Going forward, Pulmuone is expected to improve results by focusing on the room-temperature business, which offers higher operating efficiency, within the food manufacturing sector.
Ha Hee-ji, an analyst at Hyundai Motor Securities, said, "Despite the market's pullback in consumption, strong sales of new products in B2C and business-to-business (B2B) continued to drive growth," adding, "External growth is expected through focused nurturing of the room-temperature business, which has high operating efficiency."
The food service distribution sector is also maintaining its growth trend. Ha said, "A steady uptrend in sales continues through industrial captive demand (intra-group market), military meal services, and new orders," adding, "It is positive that profit improvement is appearing alongside workforce and operational efficiency gains."
Overseas subsidiaries are also expected to see sales increase. Last year, both the U.S. and China units grew sales. Ha said, "The U.S. subsidiary posted 10% on-year sales growth as stable growth continued in tofu while expanding the K-food and noodle categories," adding, "In China, sales rose 8% as key products such as tofu, pasta, and frozen items grew evenly."
However, sales at the Japan subsidiary slowed, though profitability is expected to improve gradually. Ha said, "In Japan, sales fell 10% on-year due to slower growth of existing key products," adding, "By the third quarter of this year, the current five plants in Japan will be consolidated into three, and gradual profitability improvement is expected."