Kooksondang: Two investment points: Makgeolli and Farm8 Stake online sale


The author is an analyst at NH Investment & Securities. He can be contacted at [email protected] — Ed.

Kooksoondang’s revenues continued to improve due to price increases for Makgeolli and Baekseju products. Once government deregulation measures (regarding the inclusion of Makgeolli as a traditional liquor) are enacted, Kooksoondang stands to benefit from the diversification of distribution channels. The growing value of Farm8 (equity) also deserves attention.

Online sale of Makgeolli in the cards

On September 14, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) held its first meeting on agricultural food regulatory reform, announcing its intention to incorporate Makgeolli into the traditional liquor category. Korean. The proposal is significant in that such an action would allow online distribution of Makgeolli products. That said, it will likely take some time before the proposal is actually implemented, as liquor tax reform is a prerequisite.

The aforementioned government plan is expected to help boost sales of Kooksoondang’s premium product lines (e.g., 100 billion Makgeolli, Old Makgeolli and Babambabam prebiotics), which are believed to account for around 15% of Kooksoondang’s total sales, although their part of the combined sales was not disclosed in the company’s business reports. The diversification of secure sales channels through the sale of Makgeolli online should also help boost overall sales.

In HY22, Kooksondang’s export amount hit a record high at W7.7 billion (20.1% of total sales). Although exports have slowed since 1Q22, we expect annual export growth of 20% or more this year. It should be noted that exports to the United States and Japan, the company’s main export markets, are proving robust. We expect the company’s export share to increase from 7% in 2014 and 15% in 2020 to 20% in 2022.

In June, the company implemented a 10.1% price increase for Baekseju, which accounts for 20% of its total sales, and raised prices for other major products by 10-25%. Supported by such price increases, its 2022 sales are projected at W77.9 billion (+19.5% yy) and OP at W11.9 billion (+40.9% yy).

Pay attention to the value of Kooksondang’s stake in Farm8

At Farm8, which Kooksoondang invested in in 2014 and now has a stake of more than 40% both directly and indirectly through a fund, EV is steadily rising. Plan T Farm (from Farm8’s Agtech business) is currently raising capital, with its valuation reaching around 300 billion won. We note that the value of Kooksondang’s stake in Farm8 has increased more than 10 times.


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