Easing Social Distancing and Price Increases... Boosting Liquor Stocks

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The liquor stocks are gaining momentum as the government eases social distancing measures and prices rise.

According to the Korea Exchange on the 4th, as of 9:05 a.m., HiteJinro was trading at 36,100 KRW, up 1.12% from the previous day. Compared to early last month, this is an increase of 18.56%, and 29.86% higher than the 52-week low. Muhak saw an even larger increase, rising 40.78% since February. At the same time, Lotte Chilsung was up 0.64% from the previous day at 158,000 KRW, marking a 9.72% rise compared to early last month.

The sharp rise in liquor stocks is influenced by the government's easing of social distancing. Previously, from the 19th of last month, the government extended the operating hours of restaurants and cafes by one hour, from 9 p.m. to 10 p.m. Additionally, from the 5th to the 20th, operating hours for multi-use facilities were extended by one hour, allowing business until 11 p.m. Naturally, the easing of distancing measures has increased expectations for recovery in the entertainment market and reopening.

Price increases in liquor are also driving stock price gains. Liquor companies have raised prices citing rising raw material costs, which is expected to lead to improved profits. HiteJinro raised the wholesale prices of soju products such as Chamisul and Jinro by 7.9% starting from the 23rd of last month. Lotte Chilsung plans to increase the wholesale price of soju, including Chum Churum, by an average of 7.2% from the 5th of this month, and Muhak raised the wholesale prices of products like Good Day and White by an average of 8.8%.

Shim Eun-joo, a researcher at Hana Financial Investment, explained, "HiteJinro's consolidated sales and operating profit for this year are estimated to be 2.4218 trillion KRW and 223 billion KRW, up 9.9% and 28.1% respectively from the previous year," adding, "Considering its absolute market share in the soju market, a significant profit leverage effect from the price increase is expected."

Jang Ji-hye, a researcher at DS Investment & Securities, said about Lotte Chilsung, "Soju is expected to see performance growth this year due to the recovery of the entertainment market and price increases, and beer is regaining market share centered on Cloud Draft. An increase in factory utilization rates and operating leverage effects are expected through contract manufacturing (OEM) of craft beer and others."

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