[Click eStock] "Lotte Chilsung, Simultaneous Improvement in Price and Demand"

[Asia Economy Reporter Lee Jung-yoon] Hana Financial Investment maintained a buy rating and a target price of 200,000 KRW on the 23rd for Lotte Chilsung, citing expected recovery in alcoholic beverage demand, improved beverage mix, and the effect of price increases.

Lotte Chilsung's consolidated sales for the first quarter of this year are expected to exceed market expectations, with revenue increasing 10.2% year-on-year to 593.8 billion KRW and operating profit rising 33.9% to 43.2 billion KRW. Beverage sales recorded a single-digit percentage increase compared to the previous year, and operating margin is estimated to improve by 0.6 to 1 percentage point year-on-year due to the effect of price increases and product mix improvement. Alcoholic beverage sales are expected to increase by double digits compared to the previous year, driven by continued growth in wine and whiskey, and positive impacts on performance from pent-up demand for soju and beer.

Sales for this year are forecasted to increase 8.2% year-on-year to 2.7127 trillion KRW, with operating profit rising 28.4% to 234 billion KRW. Sim Eun-joo, a researcher at Hana Financial Investment, stated, "We believe the beverage segment will continue to see mix improvement effects due to price increases and steady new product sales," adding, "For alcoholic beverages, total demand recovery will accelerate in the second half as social distancing measures are eased."

She continued, "Soju prices have been raised, and considering competitors' beer price hikes, beer prices are also likely to increase," adding, "Considering the above, this year we expect simultaneous improvements in price and demand, leading to a full-scale profit leverage effect."

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