[Click eStock] "HiteJinro, Q3 Earnings Expected to Decline"

Yuanta Securities Report
Positive Outlook on Transition to With-Corona Era

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating and a target price of 45,000 KRW for HiteJinro on the 31st.

HiteJinro's third-quarter earnings are estimated to show consolidated sales of 580 billion KRW and operating profit of 42.8 billion KRW, down 8% and 34% respectively compared to the same period last year. The beer segment is expected to record sales of 210 billion KRW and operating profit of 42.8 billion KRW, decreasing by 13% and 58% year-on-year respectively. The soju segment is forecasted to have sales of 320 billion KRW and operating profit of 34.6 billion KRW, down 5% and 23% from a year earlier. Eunjeong Park, a researcher at Yuanta Securities, explained, "The main factor is the rise in cost ratio due to a decline in operating rate," adding, "Costs and other expenses will be tightly managed."

The contraction of the alcoholic beverage market in the third quarter is inevitable. This is because the social distancing level 4 has been in effect from the 12th of last month until now. In the second quarter, the beer market decreased by about 10% year-on-year, and the soju market saw a high single-digit volume decline, but in July, the downward trend appears to have expanded. Since the decline began in earnest from mid-July, the overall market in the third quarter is expected to see at least a 15% decrease in beer volume and a 10% decrease in soju volume.

Due to the impact of social distancing in the third quarter, the proportion of entertainment consumption, which was similar to the household proportion, fell to the low 30% range for beer and mid-to-high 40% range for soju based on the second quarter. However, the consideration of a 'With Corona' era is a positive factor. The transition to With Corona is mentioned to occur when 90% of the elderly and 80% of adults complete vaccination, which is expected to be around October according to the government's vaccination plan.

Researcher Park said, "The end of weak demand is not far off, and HiteJinro will have a comfortable base from the fourth quarter," analyzing, "Although an aggressive marketing environment is a concern, the market is likely to show a more pronounced effect of volume increase due to the recovery of suppressed demand."

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