[Click eStock] "Lotte Chilsung, Earnings Estimates Raised... Target Price Up 5%"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Lotte Chilsung on the 17th and raised the target price by 5% to 230,000 KRW.

Lotte Chilsung's expected sales for the first quarter are 606.8 billion KRW, representing a 13% increase compared to the same period last year. Operating profit is projected to reach 45.7 billion KRW, a 42% upward revision, significantly exceeding market expectations of 35.7 billion KRW.

Currently, the monthly average sales of zero-carbonated products exceed 10 billion KRW, showing a growth rate of over 70% compared to the previous year. Sales in the non-carbonated beverage category, including coffee, tea, and sports drinks, which experienced decreased demand due to reduced outdoor activities during the pandemic, are showing growth, with separate beverage sales estimated to have increased by 11% year-on-year. Operating profit is estimated to have grown by 18%, driven by increased sales volume and improved product mix.

Strong sales of home-use soju continue. Due to the recovery of the beer entertainment market and diversification effects of other liquor portfolios such as wine, cheongju, and whiskey, sales across all categories including soju, beer, and other liquors are expected to show double-digit growth. The operating rate improvement from the integration of soju factories and the increased operating rate of beer factories due to OEM production of craft beer are expected to result in a 99% year-on-year increase in separate liquor operating profit.

Expansion of the craft beer market is also anticipated, as the revision of the liquor tax law has caused a downturn in the imported beer market. Lotte Chilsung's estimated OEM sales of craft beer this year are expected to be revised upward by 19%, from the previous 53 billion KRW to 63 billion KRW.

Researcher Yujeong Han of Daishin Securities stated, “The optimization of the number of handled items such as wine and whiskey, along with the performance impact of extension products of existing brands like ‘Cheongju Sparkling’ and ‘Cloud Chilsung Cider,’ will be reflected in the results,” adding, “Sales in the home liquor market will continue strongly throughout the year through the expansion of ready-to-drink (RTD) liquor products that can be consumed immediately after purchase.”

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