[Click eStock] "HiteJinro, Increased Marketing Costs for New Product Launch"…Target Price Down

On the 12th, NH Investment & Securities lowered the target price for HiteJinro from 36,000 KRW to 31,000 KRW, citing a downward revision of annual earnings estimates due to rising costs and increased marketing expenses related to the launch of a new beer product. However, the investment rating was maintained as Buy.

Joo Young-hoon, a researcher at NH Investment & Securities, stated, "The important factor from now on is the performance of the new beer product 'Kelly' launched on the 4th," adding, "If the new product Kelly, along with the existing product 'Terra,' can successfully establish itself, it is expected to narrow the market share gap with the leading company OB Beer." He continued, "Given the nature of the liquor industry, where corporate value tends to rise with market share growth, it is necessary to monitor sales trends closely."

HiteJinro's consolidated sales for the first quarter of this year are expected to be 586.7 billion KRW, a 1% increase compared to the same period last year, while operating profit is projected to decline by 52% to 27.8 billion KRW, falling short of consensus estimates. The main reason for the profit decrease is the advance marketing expenses related to the Kelly launch. Sales in the soju segment are estimated at 360.2 billion KRW, a 2% increase from the same period last year. Although the growth rate has slowed compared to last year, the company’s position as the number one player in the domestic soju market remains solid. Since Jinro Is Back was renewed as a zero-sugar product in the first quarter, the key issue is how quickly it can reestablish itself in the market going forward.

Beer segment sales are estimated to have decreased by 6% year-on-year to 172.8 billion KRW. Researcher Joo said, "With somewhat sluggish sales and increased costs ahead of the new product launch, a decline in margin is inevitable," adding, "This is similar to the significant cost increase issue seen during the launch of Terra in 2019." He further noted, "However, since the stock price rose along with market share at that time, the key variable for the stock price going forward is judged to be the sales performance of Kelly."

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