Alphabiz - Lotte Wellfood Remains Undervalued Despite High Dividends, Calls Grow for Capital Reallocation

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[Alpha Biz= Paul Lee] Lotte Wellfood continues to trade at a persistent valuation discount despite maintaining a high dividend payout ratio and strong financial stability, prompting calls for a strategic shift toward growth-oriented capital allocation.

According to regulatory filings on April 8, the company recently announced a corporate value enhancement plan aimed at improving capital efficiency. The plan targets a return on equity (ROE) of 8–10% or higher while maintaining a shareholder return ratio of around 35%. Lotte Wellfood also plans to expand its global revenue share and is considering the introduction of interim dividends.

The company has consistently maintained a dividend payout ratio above 35% since 2022, with last year’s payout exceeding 40%. This has been supported by stable profitability and retained earnings of approximately KRW 618.5 billion.

However, concerns remain over inefficient capital utilization. Despite a strong capital reserve ratio of over 37,000%, ROE has remained in the low 3% range, indicating limited effectiveness in converting retained earnings into higher returns.

This inefficiency is reflected in the company’s valuation. Lotte Wellfood’s price-to-book ratio (PBR) has hovered around or below 0.5x for several years, suggesting that the market values the company at less than half of its net asset value.

Analysts note that while the company’s stable cash flow and financial strength are recognized, investors are assigning limited premium due to weak growth prospects and suboptimal capital deployment.

Given the already high dividend payout, market observers argue that further shareholder returns alone may not be sufficient to close the valuation gap. Instead, reallocating accumulated capital into higher-return growth areas is seen as the key to unlocking long-term value.

Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)