[Click eStock] "HiteJinro, Expecting Recovery in the Alcohol Market"

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities forecasted on the 15th that Hite Jinro will see a recovery in demand through pub channels and an increase in the proportion of the commercial channel as the country enters a phased return to normal life starting this month.

Park Sang-jun, a researcher at Kiwoom Securities, said, "Although there is a high possibility of increased marketing expenses due to market demand recovery in the fourth quarter, the overall market demand recovery is expected to have a positive effect on the company's mid-term earnings outlook," adding, "The key point to watch going forward is whether the beer market share rises after the recovery of the commercial channel proportion."

Hite Jinro's beer segment has a higher proportion of commercial channel sales compared to competitors, with market share rising to 40%, but it has recently declined somewhat.

Operating profit in the third quarter was 44.9 billion KRW, down 30% year-on-year but in line with market expectations. Due to sluggish market demand caused by the resurgence of COVID-19 in early July, both sales and operating profit contracted compared to the same period last year. Domestic beer sales in the third quarter decreased by 19% year-on-year, with sluggish commercial channel demand and a decline in market share. During this period, domestic soju sales fell by 11%, attributed to sluggish commercial channel demand despite an increase in market share.

Researcher Park said, "Despite sales decline and GPM drop due to the sluggish liquor market, advertising expenses for the separate corporation were reduced by 14.9 billion KRW, and the consolidated operating profit margin was defended at 8.0% thanks to strong performance from the subsidiary beverage corporation."