The author is an analyst of NH Investment & Securities. She can be reached at firstname.lastname@example.org. -- Ed.
Amid the spread of Covid-19, online channels and non-face-to-face consumption are being highlighted. We recommend paying attention to Maeil Dairies and Clio, both of which proactively diversified into online channels. Although these firms should enjoy stable earnings despite Covid-19, their share prices appear not to reflect this merit.
Non-face-to-face consumption being highlighted by Covid-19
Amid social distancing campaigns and a decline in outdoor activity due to the spread of Covid-19, consumption patterns are shifting dramatically towards online and non-face-to-face consumption. We note that Covid-19 is triggering a rapid shift in the distribution market towards online channels, and this trend is predicted to continue spreading even after the Covid-19 issue fades.
Due to Covid-19, consumers aged 40~69 (the primary patrons of offline channels) are expected to migrate to online channels. Activities that were previously accomplished offline are to increasingly shift towards non-face-to-face alternatives, and the importance of online channels and non-face-to-face consumption is to continue rising.
Prefer companies proactively prepared for shift to online business model
Preferring firms that have proactively prepared to shift to an online business model amid a change in consumption patterns, we recommend Maeil Dairies and Clio. Despite the Covid-19 crisis, both plays look better-prepared to meet changes in consumer trends versus peers. However, their current share prices appear to ignore the likely solid earnings to be generated from such preparation.
Maeil Dairies stands out among F&B players, as it has been preparing for the above-described shift by launching beverage products packaged in a manner suitable for online sale. We note that the portion of online-targeted packages within Maeil’s total sales is 20% higher than that at rivals. Also positive, given that school milk represents only a small portion out of Maeil’s overall product supply, the firm should see relatively limited Covid-19 impact versus rivals.
Meanwhile, Clio stands apart from other cosmetics plays thanks to its proactive efforts to reshape its distribution channels via the closing of loss-making offline stores while at the same time beefing up its online channel. Accordingly, likely higher online channel sales amid the Covid-19 crisis are expected to offset a projected decrease in offline channel sales.