[Click eStock] "HiteJinro, Q4 With Corona Continuation Is Key"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating and a target price of 43,000 KRW for HiteJinro on the 26th. Although a performance improvement is expected in the fourth quarter, the increase in COVID-19 cases means that whether the With Corona policy continues could be a key variable affecting the results.

HiteJinro's consolidated sales and operating profit for the fourth quarter are expected to reach 547.1 billion KRW and 29.4 billion KRW, respectively, representing increases of 5.9% and 23.1% compared to the same period last year. Despite a sluggish performance last month similar to the third quarter due to social distancing regulations, considering the implementation of With Corona from this month and the recovery in alcohol sales in dining and entertainment channels, performance improvement is anticipated.

Researcher Taehyun Kim of IBK Investment & Securities explained, "Since marketing expenses were strategically reduced in the third quarter due to social distancing regulations, offline marketing such as promotional events and giveaways in the entertainment market will be actively conducted in the fourth quarter following the implementation of With Corona." He added, "Accordingly, operating profit is expected to fall short of the market consensus of 33.5 billion KRW."

By segment, beer sales are expected to reach 180.7 billion KRW, a 4.3% increase year-on-year. Operating profit is estimated to grow by 79% to 1.3 billion KRW. Although the domestic beer market shrank sharply by about 10% and 12% in the second and third quarters respectively, a growth of around 5% is expected in the fourth quarter due to the With Corona effect. While sales in the home-use channel are expected to decline, the recovery in sales in the commercial-use channel is anticipated to be greater.

Shochu sales and operating profit are expected to be 328 billion KRW and 26.6 billion KRW, respectively, marking increases of 6.5% and 12.6% compared to a year ago. Researcher Kim said, "Sales in the commercial-use channel are expected to improve," and added, "Export volumes, which decreased in the third quarter due to shutdowns in Southeast Asia including Vietnam, are expected to slightly increase considering the inventory levels of clients."

Meanwhile, with the recent rapid increase in new COVID-19 cases, there is a possibility of temporarily reverting to social distancing measures ahead of the year-end when gatherings such as year-end parties increase. Whether the With Corona policy will be suspended is expected to be a variable affecting fourth-quarter performance.

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