[Click eStock] "HiteJinro, Expected Recovery in Alcohol Sales Volume and Price Increase Effect"

[Asia Economy Reporter Lee Jung-yoon] IBK Investment & Securities maintained a buy rating and a target price of 48,000 KRW on HiteJinro on the 17th, citing high potential for earnings improvement due to sales recovery and the effects of price increases.

HiteJinro's sales for the second quarter of this year are expected to reach 624.2 billion KRW, up 10.4% year-on-year, and operating profit is projected at 50.4 billion KRW, an 18.2% increase. Following the lifting of social distancing measures in April, dining out and drinking gatherings increased, leading to a recovery in liquor sales. Earnings improvement is anticipated compared to the previous year, with sales in line with consensus estimates and operating profit slightly below expectations.

By segment, beer sales in the second quarter are estimated at 221.5 billion KRW, a 14.5% increase year-on-year, and operating profit at 11.5 billion KRW, up 94.1%. Ahead of price hikes, speculative demand occurred in March, and beer sales in May declined compared to the same month last year, but sales volume improved last month and this month due to the easing of distancing measures. Notably, HiteJinro was unaffected by the Cargo Solidarity strike, whereas competitors experienced disruptions in beer shipments, resulting in a windfall benefit for HiteJinro.

For soju, second-quarter sales are projected at 351.8 billion KRW, up 7.6%, and operating profit at 41.9 billion KRW, an 8.9% increase. Speculative demand occurred in February following price increases, and sales in March and April declined compared to the same months last year. However, sales improved in May, and despite the impact of the Cargo Solidarity strike this month, sales are expected to slightly improve due to the low base effect from the previous year and price hikes. Kim Tae-hyun, a researcher at IBK Investment & Securities, explained, "Although shipment difficulties persist, some wholesalers, large discount stores, and convenience store chains have mitigated shipment gaps by transporting goods with their own vehicles," adding, "With the withdrawal of the Cargo Solidarity strike, shipment normalization is expected soon, and order volumes from clients who had been short on inventory are projected to surge in the short term."

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