[Click eStock] "Lotte Chilsung Can Meet Growth and Profitability in the Second Half"

[Asia Economy Reporter Hwang Yoon-joo] Shinhan Financial Investment maintained a 'Buy' rating and a target price of 240,000 KRW for Lotte Chilsung on the 2nd, expecting favorable performance in the second half of the year as well.

Researcher Cho Sang-hoon of Shinhan Financial Investment stated, "Beverages are simultaneously meeting growth and profitability due to price increases and strong sales of high-margin carbonated drinks."

Researcher Cho added, "In the second half, we plan to catch both rabbits by launching functional products, zero-carbonated SKUs, expanding channels, and releasing new products that align with consumer trends," and evaluated, "It is encouraging that the market share in the zero-carbonated market, which was inferior compared to competitors, has risen to 50%."

Lotte Chilsung's zero-carbonated market share increased from 5% in 2020 to 44% in 2021 and 50% in the first half of 2022.

In the alcoholic beverages sector, although losses were recorded since 2017, it succeeded in turning a profit last year. Researcher Cho explained, "Especially, the deficit in beer is rapidly decreasing due to strong sales of Kloud draft beer, strengthening of craft beer OEM, and increased operating rates through hybrid production." Based on this, he predicted that the beer business will also turn profitable next year.

Researcher Cho pointed out, "The current stock price is still trading at about a 40% discount compared to global peers," and said, "This is a valuation that views the beer business too negatively."

He emphasized, "Since last year, various strategies to increase beer operating rates (craft beer OEM, hybrid production, etc.) have been implemented, and unlike in the past, efforts to actively change should be reflected in the valuation."

Additionally, Researcher Cho said, "A new soju product is scheduled to be launched in September," and evaluated, "Short-term cost input due to this is inevitable."

However, he added, "Since the ratio of advertising and promotion expenses to sales is managed, excessive spending is limited," and "The stock price trend is more likely to be determined by the market share trend of the new product rather than performance."

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