KOSPIFood & Beverage280360

Lotte Wellfood

₩120,200▼ 1.23%2026-10-02 close

Market Cap

₩1.1T

Turnover

₩1.6B

Volume

10,000 shares

Shares out.

9.2M

PER

15.0×

PBR

0.6×

EPS

₩9,678

Dividend Yield

2.27%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩3,300 per share · Prices as of the 2026-10-02 close

Report overview

Cocoa Normalization and Overseas Profit: Testing the Quality of the Recovery

Margins that collapsed under the cocoa cost spike rebounded in the first half of 2026, and the central debate is that the recovery is being driven by overseas units such as India and Kazakhstan.

1
Second-quarter 2026 revenue was 1.1557 trillion won with operating profit of 64.7 billion won, restoring an operating margin near 5.6 percent, versus 34.3 billion won of operating profit in the second quarter of 2025.
2
The recovery is led offshore. Second-quarter overseas subsidiary revenue rose 28 percent to 311.2 billion won and operating profit jumped 133 percent to 29.6 billion won. About 46 percent of group operating profit came from overseas, while overseas sales were only about 27 percent of the total.
3
The cost cycle has turned. Cocoa stood at 3,298 dollars per ton as of April 2026, more than 70 percent below the record high of about a year earlier, but high-cost inventory and procurement lead times delay the pass-through to earnings.
4
Domestic demand remains sluggish. Second-quarter domestic revenue rose 3.3 percent to 859.8 billion won while domestic operating profit rose 50.2 percent to 38.4 billion won. The ice cream performance leaned heavily on an early heat wave, an uncontrollable variable.
5
Company guidance and second-half cost variables stand in tension. Management guided to roughly 4 to 5 percent revenue growth and a 4 to 6 percent operating margin for this year, while Yuanta Securities and Korea Investment and Securities analyses pointed to an estimated 40 to 50 billion won of second-half cost pressure from fats, dairy prices and a weak won.

Business structure

Lotte Wellfood is a diversified food company created by the merger of Lotte Confectionery and Lotte Foods, built around biscuits and confectionery plus ice cream, and extended into edible oils, dairy processing and meat processing.

Its core brands include chocolate lines such as Ghana, Pepero, Mongshell, Crunky and ABC Chocolate, snacks and frozen desserts such as Cancho and World Cone, and Xylitol gum plus new items in the Dwaeji-bar family, while the dairy business runs under the Pasteur brand.

It is the number one player in Korea's chocolate market by share, and the only major domestic food company that processes cocoa beans into cocoa mass in-house, operating the BTC line at its Yangsan plant since 1995.

That line was upgraded with roughly 15 billion won of new equipment, lifting cocoa mass capacity from one ton to 2.5 tons per hour. This vertical integration is both a quality edge and a risk: the company says processing beans into cocoa mass itself leaves it more exposed to price swings.

Overseas operations split between local subsidiaries and exports, and second-quarter 2026 revenue was 133.4 billion won in India (up 27.9 percent), 84.8 billion won in Kazakhstan (up 39.7 percent) and 31.7 billion won in Russia (up 17.0 percent).

In 2025, combined global business revenue from overseas subsidiaries and exports rose 14.4 percent to 1.2047 trillion won.

Competitively it overlaps with Orion, Haitai Confectionery and Binggrae, and Orion posted 2025 revenue of 3.3324 trillion won and operating profit of 558.2 billion won for a 16.7 percent operating margin, far above Lotte Wellfood's 2.6 percent.

Earnings trend

Quarterly revenue · Operating profit

₩1.1T₩34.3B25Q2₩1.2T₩69.3B25Q3₩1T-₩10.5B25Q4₩1T₩35.8B26Q1₩1.2T₩64.7B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩3.2T₩112.4B2022₩4.1T₩177B2023₩4T₩157.1B2024₩4.2T₩109.5B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩1.1T	₩34.3B	3.2%
2025Q3	₩1.2T	₩69.3B	6.0%
2025Q4	₩1T	-₩10.5B	−1.0%
2026Q1	₩1T	₩35.8B	3.5%
2026Q2	₩1.2T	₩64.7B	5.6%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩3.2T	₩112.4B	₩43.9B	3.5%	2.2%	94.4%
2023	₩4.1T	₩177B	₩70.5B	4.4%	3.4%	96.0%
2024	₩4T	₩157.1B	₩84.6B	3.9%	4.0%	95.0%
2025	₩4.2T	₩109.5B	₩72.3B	2.6%	3.3%	100.0%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

Annual revenue grew from 3.2033 trillion won in 2022 to 4.0664 trillion won in 2023, 4.0443 trillion won in 2024 and 4.2160 trillion won in 2025, with the 2022-to-2023 step-up largely reflecting a full-year contribution from the merged entity. Profit was the problem.

Operating profit fell for two consecutive years, from 177.0 billion won in 2023 (4.4 percent margin) to 157.1 billion won in 2024 (3.9 percent) and 109.5 billion won in 2025 (2.6 percent), while net profit attributable to owners slipped from 84.6 billion won in 2024 to 72.3 billion won in 2025.

On a quarterly basis the trough was the fourth quarter of 2025, with revenue of 1.0198 trillion won, an operating loss of 10.5 billion won and a net loss attributable to owners of 17.8 billion won.

Results then improved for two straight quarters: revenue of 1.0273 trillion won and operating profit of 35.8 billion won (about 3.5 percent margin) in the first quarter of 2026, followed by revenue of 1.1557 trillion won and operating profit of 64.7 billion won (about 5.6 percent) in the second quarter, close to the 69.2 billion won earned in the third quarter of 2025.

Summing the four quarters from the third quarter of 2025 through the second quarter of 2026 gives roughly 4.3596 trillion won of revenue and about 159.3 billion won of operating profit, already above the full-year 2025 figure.

On the quality of that improvement, profit rose even with about 14.3 billion won of one-off costs including an enterprise resource planning build-out, while rationalization of low-efficiency stock keeping units, consolidation of the Gimcheon and Cheongju plants and logistics efficiency lifted the operating margin 2.4 percentage points year on year.

Cash flow, however, softened with the investment cycle: operating cash flow declined from 453.0 billion won in 2023 to 285.6 billion won in 2024 and 231.1 billion won in 2025, and the debt-to-equity ratio rose from 95.0 percent in 2024 to 100.0 percent in 2025.

In short, 2025 was the year cost shock consumed profit, and the first half of 2026 was the phase in which cost relief and restructuring effects brought profit back.

Industry analysis

Confectionery earnings over the past three years have effectively been set by the cocoa cycle. International cocoa was 2,540 dollars per ton in January 2022, passed 4,000 dollars in 2024 and broke a record 10,000 dollars in April of that year.

Prices then stabilized, and cocoa fell to 3,298 dollars per ton as of April 2026, holding in the 3,000-dollar range for three consecutive months.

Producers remain cautious, however: the industry argues that raw materials bought during the high-cost period are still flowing through and that even reduced prices sit above the long-run norm centered on about 2,500 dollars per ton.

On pricing, there were multiple rounds, including an average 12 percent increase on 17 chocolate-containing items in May 2024 and an average 9.5 percent increase in February 2025, yet critics note that government price-monitoring pressure kept increases below the scale of cost inflation.

In cycle terms, inputs are normalizing while prices have already been raised, which is the point at which the margin spread widens.

Competitive positioning diverges sharply: observers note Lotte Wellfood was hit harder because bar chocolate such as Ghana Chocolate is core to its mix, whereas Orion carried a smaller bar-chocolate weighting and ran a profitability-first strategy.

On the demand side, a structurally flat domestic market has handed the growth role to overseas markets, and India, the world's most populous country with a confectionery market of roughly 17 trillion won, has become the shared battleground for Korean food companies.

India nonetheless carries many variables, including vegetarian and religious dietary norms, a hot and humid climate, and distribution challenges across a vast territory.

Outlook

Management's targets for this year are roughly 4 to 5 percent revenue growth and a 4 to 6 percent operating margin, and first-half results started inside that band.

The second-half plan breaks into strengthening local brand power and distribution in key bases such as India and Kazakhstan, export marketing tied to Korean culture plus entry into global retail channels, and reinforcing core domestic brands alongside continued efficiency work.

India is the most concrete growth axis: the Pune ice cream plant stabilized output and lifted peak-season sales with a 61 percent average utilization rate in the second quarter, while the biscuit business started a fourth Choco Pie line in June.

Having completed the merger of Lotte India and Havmor, the company is rolling out its One India strategy targeting 1 trillion won of annual revenue by 2032, backed by capital spending including the Haryana Pepero line and the new Pune plant.

For Pepero, exports reach some 50 countries and, given the seasonal skew toward the second half, overseas sales are expected to top 100 billion won for the first time this year, and the company plans to keep pushing the Americas and Southeast Asia with ambassador Stray Kids while opening emerging markets such as India, Europe and China.

Longer term, it has set out 5.5 trillion won of annual revenue and a global sales share above 35 percent by 2028, plus 1 trillion won of annual India revenue by 2032. Investment pacing, by contrast, has been recalibrated.

Completion of the Pyeongtaek plant and central distribution center expansion was pushed from June 30, 2026 to March 30, 2028, about 21 months, while total investment rose from 220.5 billion won to 237.6 billion won.

The company says it will keep this year's capital expenditure within earnings before interest, taxes, depreciation and amortization, setting planned capital expenditure of 345.9 billion won against an EBITDA target of 343.0 billion won.

Valuation

PER

15.0×

PBR

0.6×

ROE

3.9%

EPS

₩9,678

BPS

₩256,324

Dividend per share

₩3,300

The shares currently trade below the company's disclosed net asset value per share, meaning a discount multiple relative to book equity.

The earnings-based multiple is unusual in that the profit input itself is still shifting: the measurement window still contains the fourth-quarter 2025 operating loss, so the base figure changes as profit normalizes.

Within the sector, the profitability gap is often cited as the reason for multiple differences, since the 2025 operating margin was 2.6 percent against Orion's 16.7 percent, and how far the first-half 2026 margin recovery narrows that gap is the point to watch.

Dividends are calculated from the disclosed cash dividend per share divided by the current price; operating cash flow of 231.1 billion won supported the dividend base even in the weaker 2025, though a larger capital expenditure plan leaves free cash headroom tight.

On the brokerage side, analyst Lee Da-yeon of Daol Investment and Securities raised the target price to 150,000 won from 140,000 won in a report dated August 10, 2026. That conveys the brokerage's own view and is not a judgment or opinion of KOSAI.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Cost cycle reversal meeting the lag from earlier price hikes

The cocoa spike gutted 2025 profit, but the cycle has already turned. Cocoa fell to 3,298 dollars per ton in April 2026, more than 70 percent below the record peak, and analysts noted the margin spread improved as earlier price increases began flowing through from the first quarter.

The operating margin indeed moved from 2.6 percent for full-year 2025 to about 5.6 percent in the second quarter of 2026. With list prices already raised, cost relief falls through more directly to profit.

A structural shift in overseas profit contribution

Of 64.7 billion won of second-quarter group operating profit, overseas units delivered 29.6 billion won, about 46 percent, while overseas revenue was only about 27 percent of sales. A profit share far above the revenue share implies overseas margins exceed domestic ones.

Kazakhstan revenue rose 39.7 percent on price increases and export expansion, and the Pune plant in India averaged 61 percent utilization in the second quarter, leaving room to run. The remaining headroom in utilization and local penetration is the core of the constructive case.

Cost structure rebuild and brand concentration

Evidence suggests the profit improvement is not purely a cost tailwind. Profit surged despite about 14.3 billion won of one-off costs, while low-efficiency stock keeping unit rationalization, consolidation of the Gimcheon and Cheongju plants and logistics efficiency added 2.4 percentage points to the operating margin.

The company continues to reorganize sales channels and improve logistics and procurement processes. Analyst Cho Sang-hoon of Shinhan Investment Securities also cited expected synergies and efficiency gains after the merger of the biscuit and ice cream entities.

Bear factors

Structural stagnation and weather dependence at home

The offshore strength also sharpened the limits at home. Second-quarter domestic revenue grew just 3.3 percent to 859.8 billion won. The ice cream result leaned on an early heat wave, exposing the risk that domestic performance hinges on uncontrollable weather. Commentary has also flagged the difficulty of expecting clear growth from the domestic market.

Cost and currency pressure carrying into the second half

Cocoa is not the only input. Yuanta Securities and Korea Investment and Securities analyses pointed to roughly 40 to 50 billion won of second-half cost pressure as edible oil and dairy prices rise alongside a weak won, and cocoa futures are still judged high versus normal years.

The company itself said difficulties should persist in the second half amid cocoa price volatility and fallout from Middle East conflict. In other words, there is no guarantee the second-quarter margin simply holds.

Investment burden and cash headroom

Growth investment is colliding with balance sheet capacity. Operating cash flow fell from 453.0 billion won in 2023 to 231.1 billion won in 2025, and the debt-to-equity ratio rose to 100.0 percent in 2025.

Cash and equivalents fell about 103.7 billion won to 362.1 billion won at the end of the first quarter of 2026 from 465.8 billion won at end-2025, while the debt ratio rose to 102.2 percent.

The roughly 21-month delay of the Pyeongtaek plant and central distribution center expansion to March 2028 also reads as a deliberate slowing of investment pace.

Risk factors

Raw material and currency risk

A chocolate-heavy product mix leaves cocoa price sensitivity high even within the sector.

The company says the impact is larger than at peers because it processes beans into cocoa mass itself, and its third-quarter 2025 report showed cocoa-related input prices of 15,440 won per kilogram, nearly double the 8,718 won a year earlier.

Industry sources note it takes more than six months for spot price declines to reach actual costs, which means a renewed price rise would likewise accumulate with a lag.

Pricing policy and regulatory risk

Passing costs through is not straightforward in this market. Commentary has repeatedly noted that government price monitoring kept increases below the scale of cost inflation, and the company has already raised prices on key items, making further hikes awkward.

Conversely, if cocoa stays lower while list prices hold for an extended stretch, pressure from consumers and regulators to cut prices could build. The lag between input and output prices works as a two-way risk.

Geopolitical and trade risk

As overseas profit weight rises, so does country risk exposure. Russian subsidiary revenue rose 17.0 percent to 31.7 billion won in the second quarter, yet that region is permanently exposed to sanctions and currency swings, and the company itself flagged fallout from Middle East conflict as a second-half uncertainty.

On exports, a United States tariff increase from 10 percent to 15 percent was cited as a variable, and on its second-quarter conference call the company said the impact should be limited because Pepero can secure up to a 20 percent margin in the United States. That assessment would need re-verification if policy shifts again.

What to watch next

Early November 2026
Third-quarter results. Last year's third-quarter figures were released on November 4. The keys are whether operating profit exceeds the 69.2 billion won base of the third quarter of 2025 and how much of the estimated 40 to 50 billion won of second-half cost pressure actually shows up in margins.
Around November 11, 2026
Pepero Day season performance. Because Pepero sales skew to the second half, overseas revenue is expected to top 100 billion won for the first time this year, so the number of campaign countries and export value will help gauge whether overseas growth is sustainable.
Quarterly report filing during the fourth quarter of 2026
Volume indicators for the India business. Watch the quarterly report and conference call for utilization after the Pune plant's 61 percent average second-quarter rate and the fourth Choco Pie line that started in June, plus the revenue contribution from the Haryana Pepero line.
Expected in early February 2027
Full-year results and guidance achievement. This is when it becomes clear whether the guided 4 to 5 percent revenue growth and 4 to 6 percent operating margin were met, alongside 2027 guidance and the dividend decision.
Monthly, as commodity price data is published
Cocoa, edible oil and raw milk prices plus the won exchange rate. Producers maintain that even reduced cocoa prices sit above normal-year levels, so any renewed price rise must be read together with the pass-through lag of six months or more to judge margin direction.

Overall view

For Lotte Wellfood, the past three years were dominated by the cost cycle. Operating profit fell from 177.0 billion won in 2023 to 109.5 billion won in 2025, the operating margin slid from 4.4 percent to 2.6 percent, and the fourth quarter of 2025 produced a 10.5 billion won quarterly operating loss.

The trend changed in 2026, with operating profit of 35.8 billion won in the first quarter and 64.7 billion won in the second, taking the sum of the latest four quarters to about 159.3 billion won, already above the full-year 2025 figure.

On the nature of that recovery, the fact that roughly 46 percent of second-quarter group operating profit came from overseas operations representing about 27 percent of sales captures the structural shift most concisely.

Cutting the other way, domestic revenue growth was only 3.3 percent, analyses estimate 40 to 50 billion won of second-half pressure from edible oils, dairy and the currency, and operating cash flow has shrunk while the debt ratio has risen.

What must be verified is whether the second-quarter margin reflects a cyclical rebound or a structural improvement, and the answer will come from second-half cost pass-through, India utilization rates and Pepero Day season exports.

This report is informational, based on regulatory filings and media coverage, and contains no investment recommendation or buy or sell opinion.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.