When KOSPI Swings, Food Shares Soar Over 10% as "Exchange Rates Lend a Hand"... Securities Firms Highlight 'Two Stocks'[Jumweek Money]

Food and Beverage Sector: Stock Prices Up 10.8% Since July
Performance Improvement Driven by Price Hikes and Easing Raw Material Burdens
"Nongshim and Lotte Wellfood Are Worth Considering"

Recently, while there has been significant volatility in the domestic stock market, shares related to food and beverages have risen. Market experts suggest that now is the time to pay attention to the sector due to price increases and eased raw material cost pressures.

Shinhan Investment & Securities analyst Cho Sanghoon stated in a recent report titled "Why We Should Revisit the Food & Beverage Sector," that "at a time of high stock market volatility, the defensive characteristics of the food and beverage industry are coming to the fore." Cho explained that, since July, the food and beverage sector index has increased by 10.8%, outperforming the KOSPI index by 33 percentage points.

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He also emphasized that the strength of the Korean won had a positive impact on the share prices within the food and beverage sector. "The food and beverage industry relies heavily on imported raw materials and has significant foreign currency liabilities, so a stronger won results in lower input costs and reduced foreign currency net debt valuation losses, both of which are positive factors," Cho stated. "Historically, there has also been an inverse correlation between share prices in the sector and the won-dollar exchange rate." In fact, with a 10% appreciation of the won, the changes in net profit by company are as follows: Lotte Chilsung 11%, Nongshim 10%, Lotte Wellfood 9%, CJ CheilJedang 5%, HiteJinro 3%, Orion -4%, Samyang Foods -11%, and KT&G -15%.

He predicted that the reduction in raw material cost burdens, along with price increases, would have a positive effect on share prices. He noted that, even under El Niño conditions, the harvest for soybeans and corn has been plentiful, and that China’s pork prices, which are used to gauge grain demand, are at their lowest level since 2010. "The risk that raw material and component costs will erode the overall profitability of the food and beverage industry appears to be limited," he said. He also mentioned that most companies, including Lotte Chilsung, Nongshim, CJ CheilJedang, and Pulmuone, have already implemented price increases.

Cho assessed that, as overseas growth continues, both the easing of cost pressures and improvements in cost efficiency make it particularly effective to focus on Nongshim and Lotte Wellfood, whose earnings improvement stands out.

This content was produced with the assistance of AI translation services.