[Click e Stocks] "Lotte Chilsung, Expected Record Quarterly Performance in 3Q"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities maintained its 'Buy' rating and target price of 185,000 KRW for Lotte Chilsung, expecting the company to record its highest quarterly performance in the third quarter of this year.

NH Investment & Securities forecasted that Lotte Chilsung will achieve consolidated sales of 679.2 billion KRW and operating profit of 75 billion KRW in the third quarter, marking the highest quarterly performance. These figures represent increases of 5.3% and 28.5%, respectively, compared to the same period last year. The beverage division is estimated to record sales of 493.4 billion KRW, up 10.5% year-on-year, and operating profit of 71.5 billion KRW, a 30.3% increase. Jomi Jin, a researcher at NH Investment & Securities, explained, "The pressure from rising raw material costs is being offset by price increases, and strong sales of high-margin zero-calorie carbonated drinks and bottled water, along with favorable weather conditions, will lead to the highest quarterly performance." The liquor division is expected to see sales increase by 5.0% to 180.4 billion KRW and operating profit double to 2 billion KRW. Although soju sales have declined compared to last year due to strengthened social distancing measures, operating profit is expected to increase year-on-year thanks to a 7% rise in regular beer sales, contract manufacturing (OEM) of craft beer (approximately 15 billion KRW), and a 25% increase in wine sales.

The upward trend in performance is expected to continue next year. Researcher Cho said, "Contrary to the perception of being a beneficiary of COVID-19, the business was severely impacted when the pandemic first occurred last year, and this year, while the situation has not fully recovered, performance is improving through restructuring and product diversification." He added, "Next year, the upward trend in performance will continue with recovery in the beverage division's B2B (business-to-business) channels, soju sales in the liquor division, and expansion of craft beer OEM and wine sales."

Despite intensified brand competition in the craft beer market, Lotte Chilsung is expected to benefit as the number of clients continues to increase, contributing to higher beer production rates. Wine is in the early stages of a consumption trend shift, and demand is growing in B2B channels such as bars and restaurants, indicating sustained growth even in the reopening (resumption of economic activities) phase. Researcher Cho explained, "Beverage division B2B sales have not yet reached 2019 levels, and soju was more severely affected this year, so a full recovery is expected next year," adding, "Expectations for the development of the Seocho-dong site also remain valid."

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