Expect Brisk Earnings Growth in 2022
The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. -- Ed.
Wielding aluminum extrusion and smart farm installation technologies, Green Plus boasts the strongest smart farm track record in Korea. With the population aging and with farmer numbers falling, the Korean government is promoting its Smart Farm Innovation Valley initiative to younger people. Led by sound sales expansion in Australia and Thailand, Green Plus is set to achieve 25% y-y stop-line growth in 2023.
Smart farm era upon us
Boasting an outstanding track record in building smart farms, Green Plus has occupied top spot in domestic smart farm construction for a decade. Having established a value chain ranging from smart farm design and materials manufacturing to construction, it is capable of building smart farms at lower price tags than its rivals.
Moving ahead, the smart farm market is predicted to display structural growth in line with both population aging and decreasing farmer numbers. In addition, the government is expanding its Smart Farm Innovation Valley initiative in order to modernize agriculture, expand smart farms, and create jobs in local areas.
Expectations toward Green Plus’s overseas domain are running high as well. The company plans to establish smart farms in Oceania along with its Australian partner Farm 4.0, with accompanying sales estimated to reach around W10bn next year. Also boding well, the firm’s Thai subsidiary is preparing to conduct a smart farm seedling business, a development which should contribute significantly to Green Plus’s OP from 2023, as the target crops are expected to reap an OPM of 30%.
Expect brisk earnings growth in 2022
We expect Green Plus to book 2022 sales of W959bn (+15.2% y-y) and OP of W9.6bn (+88.7% y-y), with the hefty OP expansion being spurred by: 1) robust sales growth of domestic smart farm materials and equipment; and 2) rapid reflection of rising raw material prices through ASP hikes. Despite this rosy outlook, the company’s shares are trading at 2022E P/E of 19.7x, an attractive level considering the growth potential.
With subsidiary Green K Farm running an in-house smart farm business, we view it as offering strong growth potential. Starting first with berry cultivation in 2016, the subsidiary has been expanding its scope to include tropical fruits and chives this year. We forecast Green K Farm to deliver sales of W10bn (+233% y-y) in 2023.