NH Investment & Securities announced on August 10 that Lotte Wellfood has begun to see a rebound in profitability due to the effects of cost structure improvements implemented last year. The firm raised its target price for Lotte Wellfood from 150,000 won to 165,000 won while maintaining a 'buy' rating.
Research analyst Joo Young-hoon stated, "The results of last year's cost structure efforts are now becoming evident. Despite rising raw material prices and high exchange rate burdens, the impact of profitability improvements has been more significant, which is the background for the strong second-quarter performance."
He added, "We expect the trend of profitability improvement to continue in the second half of the year, and we believe the company's 2026 guidance of a revenue growth rate of 4-5% and an operating profit margin of 4-6% is highly achievable."
Regarding the second-quarter results, he noted, "Consolidated revenue and operating profit were 1.1557 trillion won and 64.7 billion won, respectively, significantly exceeding the consensus for operating profit. As sales rebounded alongside cost structure improvements, the effects on profitability were maximized."
On domestic operations, he reported, "Domestic sales increased by 3.3% compared to the same period last year, likely due to favorable weather conditions that improved ice cream sales, and the growth rate of snack sales also expanded compared to the previous quarter."
Joo also highlighted that "overseas sales rose by 27.6% year-on-year, achieving over 20% sales growth for the first time since the fourth quarter of 2022. The performance in key markets like India and Kazakhstan stood out and drove overall overseas business growth."
He concluded, "The strong growth in overseas sales is a key factor driving up the valuations of food and beverage companies, and we anticipate an increase in corporate value based on this."
* This article has been translated by AI.
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