[Click eStock] "HiteJinro, Speed of Demand Recovery is Crucial"

Kiwoom Securities "Maintains HiteJinro Target Price at 55,000 Won"
Increased Competition Inevitable in Early Demand Recovery if Operating Hours Regulations Are Eased

[Asia Economy Reporter Gong Byung-sun] As restrictions on restaurant operating hours due to COVID-19 continue, an analysis has emerged that the speed of demand recovery for HiteJinro has become crucial. However, the sales volume share of the beer Terra appears to be expanding. Accordingly, Kiwoom Securities maintained a target price of 55,000 KRW and a 'Buy' investment rating for HiteJinro.

According to Kiwoom Securities on the 17th, the initial demand recovery and the pace of increased competition for HiteJinro in the second quarter are expected to be weaker than anticipated. Although people have resumed outdoor activities, restrictions on restaurant operating hours after 10 PM remain in place. Additionally, the recovery of alcohol consumption in the commercial channel is slower than expected. Kiwoom Securities researcher Park Sang-jun stated, "If demand in the commercial channel revives due to the easing of operating hour restrictions, an increase in competition intensity during the early phase of demand recovery will be inevitable."

The continuous expansion of Terra's sales volume share is a positive sign. Since Terra has a relatively high proportion in the commercial channel, it is analyzed that the expectation for market share (MS) growth remains valid in the upcoming phase of alcohol market recovery as the spread of COVID-19 decreases.

HiteJinro's operating profit in the first quarter of this year exceeded market expectations (consensus), contrary to concerns. The first-quarter operating profit was 52.9 billion KRW, a 6% decrease compared to the same period last year. This was due to weak demand in the commercial channel for beer and soju caused by social distancing measures. The market growth rate for beer declined by 9%, and soju by 4-5%. However, researcher Park explained, "The decline in sales was less severe than feared, and profits from overseas subsidiaries increased due to strong exports of fruit soju," adding, "There was also a reversal of bad debt provisions amounting to 3 billion KRW."

Beer segment sales decreased by 4% compared to the same period last year. Domestic beer sales fell by 7% year-on-year as commercial demand was sluggish due to social distancing, but household demand showed strength. In contrast, imported beer grew by 30% compared to the same period last year. Soju segment sales decreased by 5%, while Jinro's share expanded to the high teens percentage range.

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