Hanwha Investment & Securities announced on September 21 that it has raised its target price for Lotte Wellfood from 170,000 won to 200,000 won, citing expected reassessment of its overseas operations, particularly in India and Kazakhstan. The firm maintained its 'buy' rating.
Han Yu-jung, a researcher at Hanwha Investment & Securities, stated, "India is in an expansion phase, while Kazakhstan is entering a recovery phase. Additionally, the continued expansion of the LOTTE brand is expected to enhance the potential for reassessment of overseas operations."
Lotte Wellfood's business in India is accelerating, supported by an increase in production capacity (CAPA). In the first half of this year, sales in India rose by 28% compared to the same period last year, with ice cream and snacks growing by 29% and 26%, respectively. The new ice cream factory in Pune has reached an operating rate of 70-80%, and the expansion of the Choco Pie production line and the introduction of a new Pepero line are contributing to this growth.
Han noted, "The already secured CAPA and the 'ONE INDIA' strategy, which integrates the distribution networks in the south, north, and west following the merger of Lotte India and Havmor, are expected to drive significant growth in the local market."
In Kazakhstan, profitability is showing signs of recovery. In the first half of this year, sales reached 55 billion tenge, a 19.7% increase from the previous year, while operating profit surged by 86.9% to 3.9 billion tenge. The factory's operating rate, which was at 40-50% last year, has risen to 60% in the second quarter of this year.
Han speculated, "The decrease in cocoa input costs began to be reflected from the second quarter, and as price competitiveness and sales recover, production and operating rates are normalizing."
He added, "As structural profitability improves in the domestic market, the simultaneous growth in India and Kazakhstan is expected to enhance the quality and visibility of profits. If the effects of increased CAPA in India, the normalization of sales for key products in Kazakhstan, and the expansion of the LOTTE brand occur simultaneously, the potential for reassessment of overseas operations is likely to increase."
* This article has been translated by AI.
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