[Click eStock] "HiteJinro, COVID-19 End and Price Increase Effects... Target Price Up"

[Asia Economy Reporter Kwon Jae-hee] Hi Investment & Securities maintained its 'Buy' rating on HiteJinro on the 1st and also raised the target price to 44,000 KRW. This is due to the resolution of market deterioration issues caused by COVID-19 and the expectation of price increase effects.

Hi Investment & Securities forecasted HiteJinro's consolidated sales and operating profit for the first quarter of this year at 552.8 billion KRW and 53.1 billion KRW, respectively. This represents an increase of 3.3% and 0.4% compared to the same period last year.

Researcher Lee Kyung-shin of Hi Investment & Securities stated, "Considering that the market deterioration issue in the commercial sector due to COVID-19 in the same period last year has been resolved and that both soju and beer are expected to experience price increase effects, it is necessary to take these factors into account. Although there may be some cost outflows due to raw material price fluctuations, given the solid market dominance, market expectations for performance are at a manageable level."

In the case of soju, considering the base effect related to market contraction in January compared to the previous year and the pre-price increase demand in February, it is judged that a growth rate of about 8% compared to the same period last year is possible despite partial reflection of the price increase effect. However, due to the burden of a low base in export volume in the same period last year, the overall soju category growth rate is estimated at about 4.2%. The contribution of the 7.9% price increase to external growth is expected to be around 80 billion KRW annually in 2022.

Beer is also expected to reflect the low base and pre-price increase demand effects similarly to soju. Considering the 7.7% increase to be applied after March 23, the annual external growth effect is expected to be around 30 billion KRW, and if the demand cliff immediately after the increase is alleviated, volume growth in the same direction as the improvement of external variables is expected to be realized simultaneously.

Researcher Lee said, "It is judged that COVID-19 restrictions in the commercial market have ended, and if the total market demand, which has been sluggish, recovers through additional deregulation, volume growth will not be difficult assuming market share is maintained. Also, if the price increase is reflected, profit expectations will rise, and with the improvement of the external environment, efficient cost execution, and fixed cost leverage effects from volume growth reaffirmed, the stock price is expected to continue a meaningful upward trend."

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