[Click eStock] "Lotte Chilsung, 2Q Operating Profit Expected to Decline Due to Cost Burden"…Target Price Down

On the 22nd, IBK Investment & Securities maintained a buy rating on Lotte Chilsung, stating that an increase in marketing expenses is expected to inevitably lead to a decline in profits, and lowered the target price from the previous 220,000 KRW to 200,000 KRW.

Lotte Chilsung's consolidated sales for the second quarter of this year are estimated at 797.9 billion KRW, up 4.7% year-on-year, while operating profit is expected to decrease by 8.7% to 58.2 billion KRW, falling short of consensus estimates. Kim Taehyun, a researcher at IBK Investment & Securities, explained, "Amid intensified competition in the soju market, marketing expenses for Saero to expand market share have increased, making a decline in profits inevitable."

By segment, beverage sales are analyzed to increase by 3.4% to 536.4 billion KRW, with operating profit rising 5.1% to 47.2 billion KRW. The carbonated category is driving segment growth due to strong sales of zero sugar products, and export growth is expected to continue for Milkis and Lets Be.

The liquor segment is expected to improve with sales increasing 6.3% to 200.4 billion KRW; however, operating profit is forecasted to decline 24.9% to 7.2 billion KRW due to the burden of rising alcohol prices and increased marketing expenses for Saero. Researcher Kim said, "Saero recorded an average monthly sales of about 9.5 billion KRW in the first quarter, and this quarter is expected to increase to about 11 billion KRW due to the launch of Saero PET bottles and expanded distribution in commercial channels. While Cheongju is expected to maintain solid monthly sales of around 2 billion KRW, beer, which has a high proportion of home consumption, is expected to continue its sales decline following the previous quarter, and spirits sales are also expected to shrink."

He added, "While bearing cost pressures, expenses to expand market presence in the soju market are expected to continue for the time being. However, since Saero, launched in September last year, has shown steadily increasing sales, this trend is positive, and expectations remain valid for improved beer sales performance and market share next year through the launch of renewed beer brands in the second half of the year, so we maintain our buy rating."

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