[Click eStock] "Lotte Chilsung, Profitability Improvement Expected from Q3"

IBK Investment & Securities forecasted on the 26th that Lotte Chilsung's profitability will improve starting from the third quarter of this year. They maintained a 'Buy' investment rating and a target price of 180,000 KRW.

Jang Seong-ho, a researcher at IBK Investment & Securities, stated, "In the second quarter, cost burdens in the beverage sector will continue," adding, "The rise in input costs such as sugar and orange concentrate, along with the ongoing increase in the KRW-USD exchange rate, is expected to result in a decline in profits this quarter." He continued, "There will also be fixed cost burdens due to beverage capacity expansion," and analyzed, "Although prices of key products like cider and Pepsi were raised by an average of 6.9% earlier this month, considering the market's inventory depletion period, the effect of the price increase will not be significant."

Regarding the liquor sector, he noted, "Following Saero, plans are in place to expand exports of Saero Apricot, and capacity expansion is also being considered," pointing out, "The export ratio of soju is around 20%, and exports of soju to the U.S. in the first quarter increased by 42% compared to the same period last year, showing a favorable trend." He added, "On the other hand, beer sales are expected to be somewhat sluggish," explaining, "This is due to a decrease in domestic beer consumption, the discontinuation of Kloud Draft, and sales gaps from OEM orders for craft beer."

Researcher Jang predicted that profitability will improve from the third quarter. He said, "An annual operating profit increase effect of about 25 billion KRW is expected from the beverage price hikes," adding, "From the third quarter, cost burdens will ease, making it possible to improve overall company profitability."

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