[Click eStock] "Lotte Chilsung, Operating Performance Expands in Both Beverage and Alcohol Sectors... Target Price Up 22%"

[Asia Economy Reporter Park Jihwan] Hi Investment & Securities estimated on the 6th that Lotte Chilsung's consolidated sales and operating profit for the first quarter will be 525 billion KRW and 25 billion KRW respectively, representing increases of 3.5% and 299.8% year-on-year, evaluating that operating performance is in an expansion phase in both beverages and alcoholic beverages. The investment opinion 'Buy' was maintained, and the target price was raised by 22.2% from the previous 135,000 KRW to 165,000 KRW.

Researcher Lee Kyungshin of Hi Investment & Securities stated, "Despite the negative business conditions in the commercial beverage and alcoholic beverage markets due to strengthened social distancing, the profit improvement is expected to exceed market expectations as cost reduction effects in alcoholic beverages compared to the same period last year are added."

For beverages, a decline in sales volume of major categories is expected to reflect the continued impact of decreased offline demand until February. However, it is explained that in March, the base related to COVID-19 became the same, so it is judged to have entered a recovery phase.

Researcher Lee analyzed, "Considering that there was little volatility related to market dominance despite worsening external variables, it is reasonable to expect a sharp improvement from the second quarter reflecting demand recovery. The price increase of some products carried out in February is estimated to have about a 2% effect on sales improvement, considering market stabilization."

In the alcoholic beverage sector, despite the contraction of the commercial market due to COVID-19 issues, there is no additional issue of market dominance decline, and it is judged that high profit improvement will be realized as beer growth centered on new products and cost control effects are reflected.

Lotte Chilsung's consolidated sales and operating profit for this year are expected to grow by 7.5% and 50.6% respectively compared to the same period last year. In particular, it is judged that the current point is a full turnaround phase where the basic operating strength of both business divisions is improving. Researcher Lee explained, "The profit improvement until the first quarter largely reflected cost reduction despite limited external growth," adding, "From the second quarter, attention should be paid to the recovery of beverage sales and related profit increase, as well as operating performance improvement based on increased operating rates in alcoholic beverages."

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