[Click e-Stock] "H.PIO, 4.2% Dividend Yield... Overseas Growth and Profitability Improvement Expected"

The Korea IR Council said H.PIO could be revalued based on its high-dividend policy, improved profitability in its health functional food business, and overseas business expansion.

In a report released on November 12, researcher Seo Jinkyung of the Korea IR Council's Corporate Research Center cited the appeal of its high dividends, improved profitability in its health functional food business, and overseas growth potential as key investment points for H.PIO. The report did not provide an investment rating or target price.

H.PIO has expanded its business into areas including children's products and cosmetics, with its health functional food brand Denps at the center. Its flagship product, Denmark Probiotics Story, holds the top spot in South Korea's imported probiotics market, with a 44% market share.

Its dividend policy was also cited as an investment attraction. H.PIO shifted to a high-dividend policy in 2025, raising its consolidated dividend payout ratio from 23% to 29%. Its high-dividend policy, differentiated dividends favoring ordinary shareholders, continued eligibility for separate taxation, and net cash of about KRW 25 billion were seen as supporting the sustainability of its dividends. The report also said the company could be revalued as a dividend growth stock if it shifts its sales structure by expanding offline channels and recovers earnings.

The report also highlighted the growth potential of its overseas business. Researcher Seo forecast that the utilization rate at its Danish plant would rise from 30.3% in the first half of 2026 to 60-70% in 2027. This would enable the company to meet about KRW 20 billion worth of pending demand, the report said. Its subsidiary Biopharm is pursuing new global customers, including by expanding supplies to major U.S. companies, and has estimated potential annual sales growth in the mid-KRW 30 billion range.

Profitability is expected to improve in earnest starting next year. Researcher Seo forecast, "After the easing of cost pressures as inventory from the high-exchange-rate period in the fourth quarter of 2026 is depleted, the effects of sales channel changes and production internalization in 2027 could help return return on equity (ROE) to around 7%."

Seo added, "If earnings improvements are confirmed repeatedly, including the head office operating margin approaching its 10% target, the price-to-book ratio (PBR) has room to recover to 0.7 times or higher."

Until an earnings recovery is confirmed, net cash and dividends are expected to support the stock price from below. Researcher Seo said, "Until an earnings recovery is confirmed, net cash equivalent to about 30% of market capitalization and an expected dividend yield of 4.2% will provide downside support for the valuation."

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