[Click eStock] "Lotte Chilsung, Continued Strong Performance in Alcohol and Beverage Sectors"

Shinyoung Securities Report

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating on Lotte Chilsung on the 27th and raised the target price by 36% from the previous level to 170,000 KRW. This is interpreted as a result of upward revisions to earnings estimates due to expected recovery in the liquor market in the second half of the year and profitability improvement through cost efficiency.

According to Shin Young Securities, Lotte Chilsung's consolidated sales and operating profit for the first quarter are expected to reach 519 billion KRW and 24 billion KRW, up 2.3% and 285.5% respectively compared to the same period last year. Despite the impact of stringent social distancing measures at the beginning of the year, it is judged that the company will continue its performance improvement trend due to strong sales of new liquor products and wine in the home-use market.

The liquor segment experienced market contraction due to the increased social distancing measures since the end of last year, but there was no additional market share decline issue caused by the boycott movement. Researcher Jeongseop Kim of Shin Young Securities explained, “Sales in the home-use channel are expanding centered on Saeng Draft and wine launched last year,” and added, “We expect to achieve a turnaround to profitability compared to the same period last year through increased operating rates and cost control.”

Considering that the impact of COVID-19 on the beverage segment began in March last year, there is a base effect burden in January and February this year. However, recovery has been observed since March, and reflecting the price increase of beverages implemented at the beginning of the year, the first quarter is expected to be the bottom, followed by a full-scale performance improvement trend.

Consolidated sales and operating profit for this year are projected to reach 2.3647 trillion KRW and 149.7 billion KRW, up 4.7% and 53% respectively compared to the same period last year. The liquor segment is expected to achieve profitability this year. Although there are concerns about cost increases due to intensified promotional activities amid heightened competition in the liquor market in the second half, the company is expected to maintain a solid performance trend through cost efficiency efforts and increased operating rates from beer OEM.

Sales and operating profit in the beverage segment are expected to increase by 2.7% and 11.7% respectively compared to last year. Researcher Jeongseop Kim said, “Before a complete resumption of outdoor activities this year, dramatic recovery will be limited,” and added, “Considering the growth of online delivery channels, increased sales of energy drinks and carbonated water, and the effect of price increases, the performance improvement trend will continue.”

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