[Hidden Market Picks] Nutribiotech to enjoy rising demand in overseas markets

2018.03.05 15:50:06 | 2018.03.07 16:03:51

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Shares of Nutribiotech Co. (Kosdaq: 222040), a South Korean wellness and dietary supplementary product maker, have more room to grow thanks to bright business prospects in overseas markets.

For full 2017, the company is estimated to have earned 11.5 billion won ($10.6 million) in operating profit and 136.4 billion won in sales, Baro Investment & Securities Co. said in a report on Monday. Its operating profit for 2018 is projected to grow to 20.8 billion won on sales of 184.4 billion won, it added.

Founded in 2002, Nutribiotech develops, manufactures and distributes health functional foods including dietary supplement products. About 40 percent of its revenue is created from health functional foods, and the rest of 60 percent from functional foods. By business type, the original equipment manufacturing (OEM) business takes 20 to 30 percent of its sales, the original development manufacturing (ODM) business 60 to 70 percent, and the private brand business 10 percent.

The company’s earnings outlook for 2018 is upbeat thanks to increasing demand for its products in overseas markets. About half of the company’s revenue in 2017 was generated from exports.

The company pins high hopes on China, which is expected to surge to the world’s second largest health functional food market following the United States. China, which currently accounts for 14 percent of the global health functional food demand, is projected to make up 16 percent in 2020.

Sales of its Shanghai operation increased by 10 times to 37 billion won last year since its inception in 2015, contributing 27.2 percent to Nutribiotech’s total revenue. It plans to distribute its products via drug store chains such as Watsons in the second quarter of this year to expand its sales network in China and break ground for an ingredient manufacturing factory this year with an aim to complete the construction in 2019.

Nutribiotech expects income statement to benefit from added production lines and sales channels in the U.S. and Australia this year. Its U.S. factory has embarked on the operation this year, and online orders are growing. The Australian factory that was constructed in January last year is also expected to start to generate revenue this year. The company is also projected to complete the addition of probiotics line in its Australian factory in the first quarter of this year.

Baro Investment & Securities upped the company stock’s target price to 30,000 won with estimated price earnings ratio, or PER, at 40. Considering that its shares have been trading at PER of 58 since it first joined the country’s secondary stock market Kosdaq in 2015, the new target price is reasonable, according to the brokerage.

Shares of Nutribiotech Monday ended 2.45 percent down at 23,900 won from the previous session, and the price target is 30,000 won.

For more information, please contact Kim Hye-mi, analyst at Baro Investment & Securities at (+82 2 6099 8664 hmkim@barofn.com ) or visit Financial Supervisory Service (http://englishdart.fss.or.kr/). Company details and latest quarterly report can be searched under Nutribiotech or 222040.

Latest trading data is available via Korea Exchange under Nutribiotech or 222040.

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