[Click eStock] HiteJinro, Expecting Revenge Spending Effect "Target Price Raised"

[Asia Economy Reporter Lee Seon-ae] On the 16th, KB Securities announced that it has raised the target price of HiteJinro from 42,000 KRW to 44,000 KRW, an increase of 4.8%, while maintaining a buy rating.

Ryu Eun-ae, a researcher at KB Securities, emphasized, "With the full lifting of social distancing measures from April 18, demand for entertainment is expected to increase (Q↑), and following the price hikes of soju in February and beer in March (P↑), both price and quantity are expected to improve."

The limited burden of rising raw material costs is also attractive. Through proactive contracts last year, malt was purchased at low contract prices, and the annual malt inventory for this year has been stockpiled. Researcher Ryu explained, "Accordingly, the main reason for the target price increase is the upward revision of operating profit estimates for 2022 and 2023 by 7.6% and 8.8%, respectively."

HiteJinro's consolidated sales for the first quarter recorded 583.7 billion KRW (a 9.1% increase), operating profit was 58.1 billion KRW (a 9.8% increase), and operating profit margin was 10.0%, meeting the operating profit consensus of 54.3 billion KRW. Since January 17, with the easing of social distancing measures, the limit on private gathering sizes was raised and business hours restrictions were extended, leading to a recovery in the entertainment industry. The price increases for soju and beer also triggered proactive inventory stocking demand, contributing to the strong performance.

Although sales in April may be somewhat sluggish due to the carryover demand effect from the beer price increase in the previous month, the full lifting of social distancing from April 18 is expected to result in a stronger 'pent-up demand' effect. The strategy is to expand beer market share centered on Terra, which is strong in the entertainment market, and to strengthen soju market share in local areas based on the high brand awareness and market dominance of Chamisul.

The goal is to achieve a year-end market share of 40% for beer (currently estimated at 37%) and 68% for soju (currently estimated at 67%). Although marketing expenses to achieve the target market share may increase, a high operating leverage effect is expected to offset this due to the nature of the industry.

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