South Korean food stocks are bullish even as corrections in the Korean stock market due to macroeconomic uncertainties continue, with several hitting record highs.

According to the Korea Exchange on Wednesday, Samyang Foods Co., known for its popular “Buldak” instant noodle products, saw its stock price surge by 5.89 percent to hit a record high. After a remarkable 70.08 percent increase in its stock price in 2023, Samyang Foods is continuing its upward trajectory into 2024 and its stocks are up by 20.06 percent in the year to date.

Similarly, CJ Cheiljedang Corp., known for brands like “Bibigo,” recently saw an increase in its stock price, which has climbed by 11.39 percent in April 2024 to date and hit a 52-week high.

Foreign investors have driven the surge in CJ Cheiljedang‘s stock price, net-buying the stocks worth 74 billion won ($53.6 million) in 2024. The food manufacturer’s foreign ownership, which had declined to 22 percent in the middle of 2023, recently rebounded to 24.7 percent.

Dongwon F&B Co., mostly known for its canned tuna products, also achieved a 52-week high with an 11.84 percent increase in April 2024.

Food and beverage stocks are typically believed to be “defensive” stocks that are not significantly affected by economic cycles. With the recent sharp decline in the dollar-won exchange rate to 1,400 won and speculations about delayed interest rate cuts leading to a 5 percent drop in the Kospi, investor sentiment is shifting towards defensive stocks.

Food companies with powerful in-house brands are expected to continue turning in strong performances for the rest of the year. Samyang Foods is one of the food stocks with a persistently robust growth potential in 2024 thanks to the global popularity of its “Buldak” noodle series. According to IBK Securities Co., Samyang Foods is expected to see a 27.4 percent increase in noodle and snack sales year-on-year in the first quarter of 2024, driven by increased demand from the United States, Thailand, and Indonesia.

Despite a 2 percent decrease in domestic sales, the increase in exports is expected to drive overall performance. According to market data tracker FnGuide, Samyang Foods’ first-quarter sales are estimated to have increased by 30.8 percent year-on-year to 321.2 billion won. Operating profit is estimated to surge by 63.58 percent to 39 billion won by three or more securities firms.

”The diversification of export product portfolios, including the variations of the Buldak series is positive for sustained growth,” IBK Securities researcher Kim Tae-hyun said.



CJ Cheiljedang is also expected to see improved performance due to increased demand for processed and fresh food products such as dumplings and pizza, with domestic and overseas processed food sales expected to grow by 7 percent and 6 percent respectively. Hana Securities Co. estimates CJ Cheiljedang‘s first-quarter operating profit to reach 368.9 billion won, a 45.9 percent increase from the same period in 2023.

Analysts also highlighted the company’s diversified performance. CJ Cheiljedang is engaged in the bio and biological resources business, and the recovery in the bio industry combined with increasing sales of high-margin products are expected to contribute to a turnaround.

Dongwon F&B is expected to benefit from cost savings. According to industry sources, the first-quarter average price of purse seine-captured tuna was $1,420 per ton, a 20 percent decrease from the same period in 2023 and which is expected to reduce costs by 30 to 40 billion won.

Kyobo Securities Co. stated that Dongwon F&B’s first-quarter sales and operating profit are estimated at 1.15 trillion won and 54.4 billion won respectively. This is a 6.5 percent increase in sales and a 25.2 percent increase in operating profit compared to the same period in 2023. The corporate value is also satisfactory, with Dongwon F&B‘s trailing price-to-earnings ratio (PER) at 5 times over the past 12 months.

By Cha Chang-hee and Chang Iou-chung

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]