[Click eStock] "HiteJinro, Limited Impact from Cargo Solidarity Strike... 2Q Earnings Exceed Expectations"

[Asia Economy Reporter Lee Jung-yoon] Daishin Securities maintained a buy rating and a target price of 49,000 KRW on HiteJinro on the 20th, stating that the impact of the Cargo Solidarity Union's general strike is limited and that the company's second-quarter earnings this year are expected to exceed expectations.

Even after the withdrawal of the Cargo Solidarity Union's general strike, disruptions in soju shipments occurred due to some truck owners' refusal to transport and continued strike rallies, and concerns about rising overall costs due to this strike have led to continued stock price weakness. Han Yoo-jung, a researcher at Daishin Securities, said, "In the early stages of the general strike, shipment volumes significantly decreased, greatly narrowing the gap between shipment and sales volumes, resulting in a tight supply-demand situation. However, it is understood that there has been considerable recovery through the deployment of substitute personnel and direct transportation participation by wholesalers," adding, "With additional countermeasures being considered, the impact on earnings is expected to be minimal."

Previously, the Cargo Solidarity Union conducted a general strike for eight days from the 7th to the 14th. After the fifth round of negotiations between the government and the Cargo Solidarity Union, they reached an agreement to extend the safety freight rate system, which was the core issue. This system legally guarantees a minimum freight rate for truck owners.

HiteJinro's consolidated sales for the second quarter are projected to increase by 8% year-on-year to 629.8 billion KRW, and operating profit is expected to rise by 29% to 54.9 billion KRW. The operating profit is anticipated to exceed Daishin Securities' estimate of 53.2 billion KRW.

In particular, domestic beer sales in April showed a sharp decline due to preemptive demand before the price increase. However, sales in the previous and current months increased by more than 10% year-on-year, resulting in a slight increase in total sales volume for the second quarter. Reflecting the effect of the price increase, sales revenue is analyzed to grow by 9% compared to the same period last year. Domestic soju sales volume is expected to increase by 9% year-on-year, and sales revenue by 17%, due to the recovery of the on-premise liquor market.

Furthermore, the researcher explained, "Despite increases in labor and marketing costs, the increase in sales volume and the effect of price hikes are expected to improve the operating profit margin by 1 percentage point year-on-year to an estimated 8.7%."