[Click eStock] "HiteJinro, Soju Sales Expected to Recover from Q1 Low... Target Price Down"

Target Price Revised Down from 30,000 Won to 28,000 Won

Daishin Securities on the 16th downgraded the target price for HiteJinro from 30,000 KRW to 28,000 KRW, citing ongoing contraction in the liquor market and concerns over increased marketing costs due to intensified competition. The investment rating was maintained at 'Buy.'

Jung Hansol, a researcher at Daishin Securities, explained, "Due to a smaller-than-expected margin improvement caused by a decline in soju sales volume, we have lowered the operating profit estimates for soju and consequently reduced the target price." He added, "The liquor market continues to shrink due to the downturn in the dining-out market and changes in drinking culture, raising concerns about increased marketing expenses amid intensified competition." He further noted, "Ahead of the seasonal peak in the third quarter, if marketing costs are reduced in the second quarter and meaningful expansion in beer market share is confirmed, a stock price increase is expected."

HiteJinro recorded sales of 620.8 billion KRW in the first quarter of this year, up 2.9% year-on-year, and operating profit increased by 25% to 48.4 billion KRW. The beer segment successfully turned profitable. Researcher Jung analyzed, "Thanks to the Kelly effect from the new product, beer sales increased by 4.8% to 192.7 billion KRW. Although the launch of Kelly caused the existing brand Terra’s sales volume to decline, overall beer sales increased compared to the same period last year, expanding market share from the low 30% range in the first quarter of last year to the high 30% range in the first quarter of this year. Following Kelly’s market stabilization, the company continued to reduce marketing expenses, achieving profitability in the beer segment."

Although soju underperformed, sales volume is expected to recover from the first quarter low. Researcher Jung stated, "Due to changes in drinking culture such as a decrease in company dinners, the overall soju market continues to shrink, with soju sales volume estimated to have declined by 6% in the first quarter. While sales revenue increased by 2.3% to 379.2 billion KRW due to a price hike implemented in December, profitability was impaired by increased fixed costs from the sales volume decline, resulting in a 10.6% decrease in operating profit to 38.8 billion KRW." He added, "The new product 'Jinro Gold,' launched in March, has shown positive sales trends, and sales volume recovery was observed in April. Soju sales volume recovery is expected from the first quarter low."

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