Lotte Chilsung Soaked by Drizzle

[Asia Economy Reporter Eunmo Koo] Lotte Chilsung's stock price has been steadily declining. It is still considered to be struggling with the dual hardships of the Japanese boycott movement and the novel coronavirus disease (COVID-19), and there is a forecast that the recovery of market share in the alcoholic beverage sector will be the catalyst for stock price recovery.

According to the Korea Exchange on the 22nd, Lotte Chilsung's stock price closed at 93,100 won, down 0.21% (200 won) from the previous trading day, continuing a decline for five consecutive trading days. Since the beginning of the year, Lotte Chilsung's stock price has drawn a downward curve, hitting bottom on March 19 as the financial market was shaken by the COVID-19 crisis. Although the stock price seemed to recover along with the market rebound, it has been declining again since June 16. As the stock price steadily but slowly falls, the market capitalization, which was 1.119 trillion won at the end of last year, has decreased by 33.5% to 744.1 billion won as of the previous day.

The dual hardships of profitability deterioration caused by the Japanese product boycott movement that began in the second half of last year and the added adverse effect of COVID-19 appear to be influencing the stock price. Jaehun Cha, a researcher at DB Financial Investment, said, “Due to the impact of COVID-19, sales continue to decline in channels such as dining out, B2B, and schools, so the profitability of the beverage sector is expected to be at a similar level to the second quarter and worse than the same period last year,” adding, “Considering the uncertainty caused by the resurgence of COVID-19 in September, more time will be needed for performance recovery.”

Since the momentum for profit growth is still considered weak, the third-quarter performance is also expected to continue negative growth compared to the same period last year. According to financial information provider FnGuide, Lotte Chilsung's operating profit for the third quarter of this year is estimated at 47.8 billion won, a 2.4% decrease from the same period last year. Sales during the same period are also expected to slightly decrease by 0.36% to 654.7 billion won.

The catalyst for future stock price recovery is expected to be the recovery of market share in the alcoholic beverage sector. Lotte Chilsung is attempting to regain market share in the alcoholic beverage sector by launching new products such as ‘Cheoeumcheoreom Flex’ and ‘Kloud Saeng (Draft)’. The monthly sales of these new products are currently estimated to be around 4 to 5 billion won. Seonhwa Lee, a researcher at KB Securities, predicted, “Operating profit in the beverage sector will increase by only 0.1% annually on average over the next three years, but profitability will improve as the deficit in the alcoholic beverage sector is reduced.”

This content was produced with the assistance of AI translation services.