Shinhan Securities Raises Lotte Wellfood's Target Price by 14% Amid Overseas Growth

 
Shinhan Investment Corp. announced on May 11 that it has raised its target price for Lotte Wellfood from 140,000 won to 160,000 won, an increase of 14%, while maintaining its investment rating at 'Buy.' This adjustment is attributed to the company's improving performance driven by growth in overseas sales and cost efficiency in South Korea.
 
Analyst Jo Sang-hoon from Shinhan Investment noted, "Despite ongoing cost pressures, Lotte Wellfood achieved surprising results in the first quarter due to increased domestic efficiency and rising overseas sales. It is particularly important to focus on the recovery of growth in overseas markets, especially in India and Kazakhstan."
 
In the first quarter of this year, Lotte Wellfood reported consolidated sales of 1.027 trillion won, a 5.4% increase compared to the same period last year, while operating profit surged by 118.4% to 35.8 billion won, exceeding market consensus by 47%.
 
Jo explained that domestic profitability improved significantly due to efforts to streamline low-margin SKUs and channels, enhance purchasing efficiency, and improve logistics. He added that overseas sales showed broad growth across all regions, driven by increased sales volume and price hikes.
 
Looking ahead, Jo anticipates a reduction in cocoa price pressures. He stated, "Cocoa prices, which exceeded $10,000 per ton in the first half of last year, have dropped to around $3,200 this year. By the end of the second quarter, we expect the effects of improved margin spreads to be fully reflected in the results."
 
He also expressed optimism about the company's operations in India, noting, "Following the merger of the frozen and dry food divisions last year, we expect synergy effects and increased efficiency. This will lead to expanded regional coverage and a strengthened Lotte brand image."
 
Shinhan Investment forecasts that Lotte Wellfood's Indian subsidiary will achieve an average annual growth rate of 23% over the past five years, with a projected increase of 13.1% this year. The frozen food segment is expected to grow by 13.2%, while the dry food segment is anticipated to grow by 12.9%.