[Click eStock] "HiteJinro to Miss Operating Profit Forecast Due to One-Time Costs... Target Price Downgraded"

[Asia Economy Reporter Lee Myunghwan] Shinhan Financial Investment announced on the 30th that it maintains a buy rating on HiteJinro but lowers the target price by 17% from the previous 48,000 KRW to 40,000 KRW. It also predicted that operating profit would fall short of expectations due to unexpected one-time costs caused by the Cargo Solidarity Union strike.

Shinhan Financial Investment projected HiteJinro's sales for the third quarter of this year to be 654.9 billion KRW, up 17.5% year-on-year, and operating profit to be 54.3 billion KRW, up 21.1%. These figures are about 8% lower than market expectations.

Regarding sales, it forecasted that the sales volume growth rates of beer and soju would reach 7% and 12%, respectively, driven by strong sales in entertainment channels. Considering the effect of price increases, the sales growth rates are expected to be 13% and 21%. Sales of overseas subsidiaries are also expected to be favorable despite a high base.

However, unlike the favorable sales growth, operating profit is expected to be disappointing due to the impact of one-time costs. Although the Cargo Solidarity Union strike in September has ended, increases in related labor and transportation costs are unavoidable. It also noted that labor cost increases due to collective bargaining agreements will be reflected. Shinhan Financial Investment's analysis is that HiteJinro will not fully benefit from the leverage effect of increased sales, causing operating profit to fall short of market expectations.

On the other hand, Shinhan Financial Investment analyzed that the increase in such one-time costs will act as a base effect next year. Since there is little change in market demand and business conditions, the company will be able to fully enjoy the profit growth effect. It explained that the industry as a whole is expected to invest in marketing expenses to compensate for the negative growth over the past three years, and ultimately brand power will be an important factor.

Shinhan Financial Investment pointed out that HiteJinro is maintaining its market share based on brand power and plans to accelerate the overall market share growth by increasing regional penetration outside the metropolitan area. Researcher Cho Sanghoon of Shinhan Financial Investment said, "There is little change in business conditions, and rather the expectation for market share growth is greater," adding, "This is a time when expectations for the upcoming recovery are needed more than concerns about competition."

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