A Health Functional Food Producer
The author is an analyst of NH Investment & Securities. He can be reached at
esshim@nhqv.com. -- Ed.
H.PIO specializes in health functional food manufacturing and brand marketing. The firm is expanding the business scope for its premium brand, Denps, including adding vitamin offerings to the product portfolio. H.PIO achieved an earnings turnaround in 4Q21 on new product launches and renewal effects, and company-wide earnings growth is expected to continue in 2022. Usage of up to W80bn in cash also warrants attention.
Have you heard of Denps?
H.PIO is expanding its business scope and product portfolio, focusing upon probiotic and vitamin products under the premium brand of (Denps). Due to high-end product positioning, it maintains a high OPM of around 10%. Its probiotic supplements are being produced by a Danish subsidiary, with raw materials being supplied by Danish lactobacillus strain player Christian Hansen. And, its vitamin products are based on imported raw materials from DSM, a Dutch company.
Business expansion story underway, centering on premium brands
H.PIO is expanding health functional food lineup based on high brand awareness. Launched at end-2021, its Cynanchum wilfordii products are displaying brisk sales at home shopping channels, with top-line growth likely to sustain going forward via product renewals. In addition, the company is working to fortify its profitability by expanding sales through online channels, centering upon directly-managed malls.
Moving ahead, we also expect to see new business expansion and earnings growth at H.PIO’s subsidiaries. Copenhagen Recipe, a premium pet brand subsidiary, recently launched organic dog food products, and it plans to beef up its marketing and further widen its product lineup. Pio-pharm, a health functional food OEM/ODM subsidiary is expanding its third plant—in keeping, it is expected to contribute significantly towards H.PIO’s earnings from next year. The Chinese subsidiary’s sales of health functional food for children are expanding steadily. Furthermore, earnings at subsidiary Geoinfotech, a kickboard distributor acquired at end-2021, are also to contribute company-wide earnings growth.
Although H.PIO’s 3Q21 results were sluggish due to intensified competition and preparations for product renewals, an earnings turnaround was realized in 4Q21 thanks to new product launches and renewal effects. With its shares currently trading at a 2022F P/E of 9.0x, the company’s valuation level looks undemanding. Going forward, usage of up to W80bn in cash holdings also warrants attention.