[Click eStock] "HiteJinro Needs Sales Growth... Target Price Lowered"

Target Price Lowered by 7% from Previous Estimate
Sales Volume and Market Share to Determine Valuation Level

On August 28, Shinhan Investment & Securities lowered its target price for HiteJinro from 27,000 won to 25,000 won, stating that increased sales volume and expanded market share will determine the company's valuation level. The investment opinion remains 'Buy'.

Shinhan Investment & Securities researcher Cho Sanghoon explained, "We lowered our target price by 7% compared to the previous estimate due to a downward revision of profit estimates caused by increased marketing expenses," adding, "The valuation remains at a historically undervalued level, and although the urgent issue was addressed through the beer price hike in the first half, it is the increase in sales volume and market share that will ultimately determine the valuation level."

The stagnation in the alcoholic beverage market continues to persist. Researcher Cho analyzed, "The overall alcoholic beverage market in the first half of the year is estimated to have declined by 6% year-on-year," and noted, "Both B2B (business-to-business) and B2C (business-to-consumer) channels underperformed, with soju showing relatively resilient performance by category, while beer, wine, and whisky all saw double-digit declines."

Due to the sluggish business environment, HiteJinro had previously responded with a profitability-focused strategy, such as reducing marketing expenses, but this strategy is now changing. Researcher Cho stated, "Recently, the effect of the Minsheng Recovery Consumption Coupon has led to a shift away from a strictly profitability-focused strategy," and continued, "The first round of Minsheng Recovery Consumption Coupons was overwhelmingly used in the dining-out channel. As a result, HiteJinro is shifting its management strategy in the second half of the year from a focus on profitability to a market revitalization strategy centered on beer, concentrating on strengthening touchpoint marketing that directly leads to sales." According to the Ministry of the Interior and Safety, 46% of the first round of Minsheng Recovery Consumption Coupons distributed since July 21 were used within just two weeks, and 97.6% had been distributed by August 20. In terms of usage, 41.4% was spent at general restaurants, 15.4% at supermarkets and grocery stores, 9.7% at convenience stores, 8.1% at hospitals and pharmacies, 4% on clothing and miscellaneous goods, 3.8% at private academies, and 2.9% on leisure and recreation.

Market share gains are expected as a result of this strategic shift. Researcher Cho explained, "In the short term, an increase in marketing expenses is inevitable, but with the distribution of the Minsheng Recovery Consumption Coupons coinciding with the peak season and an aggressive market response strategy, we expect to see both market share gains and profit leverage effects."

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