[Alpha Biz= Paul Lee] IBK Investment & Securities maintained its 'Buy' rating and target price of 6,250 won for Kyochon F&B on Thursday, citing expectations for performance improvement this year.
The firm stated, "Kyochon F&B's fourth-quarter sales amounted to 125.9 billion won, a 13.2% increase compared to the previous year, surpassing estimates. However, operating profit was 5.5 billion won, a 45% decline compared to the same period last year, falling short of expectations." The company explained that higher-than-expected fixed costs and one-off expenses were the main factors for the miss.
IBK Investment & Securities further analyzed, "Although the operating environment in the fourth quarter was somewhat sluggish as December began, growth compared to the previous year was achieved due to the conversion of franchise regional headquarters and a recovery in consumer demand." However, "the increase in costs exceeded our estimates, leading to a decrease in profits."
The firm noted, "Additional costs of around 3 billion won due to TV advertising promotions, 1.3 billion won for bad debt expense, and higher-than-expected labor costs from absorbing employees in the franchise regional headquarters were the main reasons for exceeding our cost projections." They added, "Since there was little cost increase until the third quarter, we expect the operating expenses to stabilize once one-off costs are removed."
IBK Investment & Securities concluded, "Despite somewhat disappointing fourth-quarter results, the outlook for improved operating performance in 2025 remains valid." They believe that the conversion to franchise regional headquarters will lead to improvements in both scale and profitability, which will exceed initial projections, and that bad debt expenses may gradually be reversed.
The firm also highlighted, "Cost-saving effects from the end of sports events, the potential for improvements at key subsidiaries, and further logistics and fixed cost efficiencies are being explored." Given the expected structural growth in size and profitability this year, IBK Investment & Securities maintains a positive outlook.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
