[Click eStock] "HiteJinro, Total Demand Recovery in the Second Half is Key"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 48,000 KRW on Hite Jinro on the 21st, stating that the stock price direction depends on the recovery of total liquor demand in the second half of the year.

Consolidated sales and operating profit for the second quarter were 611.6 billion KRW and 55 billion KRW respectively, growing 8.2% and 29% compared to the same period last year. It is expected to meet market expectations, with estimated soju volume for the cumulative period of April to May increasing by the mid-single digits compared to the same period last year. Considering the price increase, second-quarter soju sales are expected to increase by 10% year-on-year.

Beer volume for the cumulative period of April to May is analyzed to have decreased again compared to the same period last year due to front-loaded demand in March. Considering volume growth and price increases in June, second-quarter beer sales are estimated to increase by around 4% year-on-year. Although advertising and promotional expenses in the second quarter were larger than in the third quarter last year, they are expected to increase compared to the previous year due to media advertising expenditures. Eunju Shim, a researcher at Hana Financial Investment, said, “One-time costs related to the Cargo Solidarity strike are expected to be limited, contrary to concerns.”

Consolidated sales and operating profit for this year are estimated at 2.4003 trillion KRW and 223.1 billion KRW respectively, growing 9% and 28.1% compared to the same period last year. This is similar to current market expectations. Considering uncertain economic conditions, total annual liquor demand is expected to grow by 4-5%. The profit leverage effect from price increases of soju and beer at the beginning of the year was conservatively estimated, taking into account the increase in selling and administrative expenses. Researcher Eunju Shim said, “We expected performance momentum to exceed market expectations in the second half, but it will likely meet expectations. If the recovery in total demand is greater, there is a possibility of revising estimates.”