Binggrae Co.’s logo [Courtesy of Binggrae]
South Korean analysts are urging investors to pay attention to Binggrae Co., one of the country’s leading ice cream makers, as predictions of a hot summer worldwide are expected to boost the company’s prospects.
Shares of Binggrae have gained 23.7 percent this year on growing expectations that demand for the cold dessert will surge as summer temperature rises.
Binggrae’s exports jumped 27 percent on year to 36.8 billion won ($27.8 million) in the first quarter. The growth was led by exports of its frozen products, which accounted for 18.6 percent of its entire figure.
The surge came as demand for frozen treats soared in Southeast Asia that is experiencing extreme weather conditions, with perceived temperature soaring to 50 degrees Celsius.
Binggrae ice cream is one of the premium brands in Southeast Asia.
Binggrae’s first-quarter operating profit reached 12.7 billion won, up a whopping 702.7 percent from a year ago, on sales of 293.5 billion won, up 14.8 percent.
The surge was driven by the positive impact of previous price increases and expansion of its export market.
Analysts anticipate that the price increase effect will be further realized starting from the second quarter of this year.
“Binggrae announced a substantial price increase of about 20 percent for its ice cream products in February, and the subsequent price adjustments were implemented at retail stores from March,” said Lee Kyung-eun, an analyst at KB Securities Co.
The analyst noted how the rising cost of raw milk presents a potential risk to Binggrae’s operating margin but the company has a robust strategy in place to mitigate such risks.
Binggrae has established a framework for annual milk purchasing contracts, ensuring stability and minimizing the adverse effects of fluctuating milk prices.
Binggrae completed its milk procurement contract in November last year, reducing its vulnerability to any sudden spikes in milk prices.
Park Chan-sol, an analyst at SK Securities Co., took note of Binggrae’s positive performance and improvement in operating profit margin and recommended a “buy” rating for the stock. The analyst set a target price of 70,000 won.
With the current stock price hovering around the 48,000 won range, Park believes that Binggrae’s history of sustained growth driven by effective price increases positions the company for continued growth.
By Park Yoon-yea and Minu Kim
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