[Click eStock] "Lotte Chilsung, Profitability Improvement Pace Disappointing... Target Price Maintained"

NH Investment & Securities maintained its buy rating and target price of 180,000 KRW for Lotte Chilsung on the 6th, stating that "although the pace of profitability improvement is disappointing, the direction has not changed."

On the same day, Younghoon Joo, a researcher at NH Investment & Securities, said, "Although the inclusion of the Philippine subsidiary (PCPPI) has been completed, the pace of profitability improvement is slower than initially expected due to initial cost issues, which is disappointing," but added, "There is no problem with the operating environment of the Philippine beverage business. It is only a matter of speed; the direction has not changed."

He also stated, "Lotte Chilsung has presented an operating profit forecast of 250 billion KRW for this year. This figure is somewhat lower than market estimates, likely due to the downward revision of the Philippine subsidiary's operating profit target," and added, "However, considering the effect of domestic liquor price increases, this is a conservative target. We believe there is a high possibility of exceeding it."

In the fourth quarter of last year, consolidated sales and operating profit were 918.4 billion KRW and 7.9 billion KRW, respectively. Operating profit decreased by 67% compared to the same period last year, falling short of market expectations.

Researcher Joo explained, "There were one-time costs such as long-term employee retirement benefit provisions. The Philippine subsidiary, which was consolidated, recorded a quarterly deficit due to cost issues," and added, "The sales growth rate of the beverage segment was 1% compared to the same period last year. The preference for zero-calorie products, where Lotte Chilsung has strengths, continued, but the business environment deteriorated significantly due to a sharp temperature drop from November to early December last year."

Furthermore, he diagnosed, "The sales growth rate of the liquor segment decreased by 1% compared to the same period last year. Ahead of this year's liquor tax changes, there was an inventory reduction trend across the industry at the end of the year. The decrease in year-end gatherings and parties also had a negative impact."

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