Korea Investment & Securities Maintains “Overweight” Rating for Food and Beverage Sector
Names Samyang Foods as Top Pick, Sets Target Price at 1.85 Million Won
The KOSPI index has seen a concentration of investment in growth stocks, leaving the food and beverage sector largely overlooked by the market. However, some experts argue that there is a need to pay more attention to growth-oriented food and beverage stocks, especially in line with the global expansion of K-food products such as Samyang Foods’ “Buldak Bokkeummyeon.”
On June 6, Korea Investment & Securities maintained its “overweight” investment rating for the food and beverage sector and recommended Samyang Foods as its top pick. The firm set a target share price of 18.5 million won for Samyang Foods.
Korea Investment & Securities reported that while the KOSPI index has risen 40% since March, the combined market capitalization of its covered food and beverage stocks has declined by 8%. Combined operating profit for these stocks increased by 11% year-on-year, but the only food and beverage companies whose share prices rose were KT&G and Orion. The stocks covered by Korea Investment & Securities include Samyang Foods, Orion, KT&G, CJ CheilJedang, Lotte Wellfood, Lotte Chilsung, Dongwon Industries, Nongshim, HiteJinro, and Binggrae.
Choi Gowoon, a researcher at Korea Investment & Securities, stated, “For a re-evaluation to occur, companies need to demonstrate performance improvements beyond base effects, along with a narrative that promises additional upside potential in the future.” She also noted, “However, as market funds have broadly left the sector, even companies with solid overseas growth momentum have experienced indiscriminate share price corrections. This ultimately represents an investment opportunity.”
The stock that drew particular attention was Samyang Foods, which is targeting the global market with its Buldak Bokkeummyeon. The company’s share price peaked at 1.63 million won at the close on September 11 last year, but has not surpassed the 1.5 million won range since. Choi explained, “The decline in Samyang Foods’ share price since last summer was not due to demand issues, but rather because output at the Miryang Plant 2 failed to ramp up as quickly as expected.” She continued, “With the plant approaching its first anniversary of completion, the implementation of a two-shift system and improvement in the working environment have now enabled full production capacity.”
With export-driven growth to the United States coming into focus, Choi projected that Samyang Foods’ operating profit will increase by over 40% this year (to 731 billion won) and by over 20% next year (to 856 billion won). “Based on forecasts, this year’s price-to-earnings ratio is only 15 times,” she said. “Given that the operating margin alone exceeds 20%, the gap between the share price and fundamentals is excessive.”
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Other stocks of interest highlighted were Lotte Wellfood and CJ CheilJedang. As of June 2, their PERs stood at just 7.7 times and 8.4 times, respectively, reflecting substantial growth potential. The fact that the food and beverage industry, as a staple consumer sector, shows a clear bottom for share prices was also cited as an attractive factor.
This content was produced with the assistance of AI translation services.
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