[Click eStock] "Lotte Chilsung, Challenging External Environment... Target Price Downgraded"

Hana Financial Investment Issues 'Neutral' Investment Opinion... Lowers Target Price from 170,000 KRW to 120,000 KRW

[Asia Economy Reporter Kum Boryeong] It has been revealed that Lotte Chilsung's liquor sales have continued to decline due to challenging external conditions.

According to Hana Financial Investment on the 23rd, Lotte Chilsung's consolidated first-quarter results are estimated at sales of 543.8 billion KRW and operating profit of 6.1 billion KRW. These figures represent decreases of 5.4% and 68.3%, respectively, compared to the previous year. Sim Eunju, a researcher at Hana Financial Investment, explained, "First-quarter beer and soju sales are expected to decrease by 20 billion KRW and 17 billion KRW, respectively," adding, "Sales in the beverage segment are expected to increase by 2%. Carbonated drinks and bottled water appear to be driving the overall beverage sales growth."

The key issue is whether the liquor top line will recover. In the first half of the year, sales decline is inevitable due to the impact of the Japanese boycott movement and COVID-19. Researcher Sim stated, "This is the time when the most effort should be put into recovering the liquor top line, but the external environment is not favorable. In the first half, it is expected that the company will focus on profitability management through cost control without aggressively investing in expenses," adding, "The second half could be different. If COVID-19 ends in the third quarter, competition in the liquor market will intensify. Lotte Chilsung's performance volatility in the second half is bound to increase. For mid- to long-term corporate value enhancement, recovering the liquor top line should take priority over short-term profits and losses, so the possibility of a profit decline compared to the previous year in the second half should also be considered."

Hana Financial Investment has given Lotte Chilsung a 'neutral' investment rating. The target stock price was lowered from 170,000 KRW to 120,000 KRW. The closing price on the 22nd was 98,400 KRW.

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