[Into the Stocks] Lotte Chilsung Expected to Benefit from New Product Effects and Rising Prices...

'Zero' Beverage and New Soju Product 'Saero' Also Popular
Expectations for Stock Price Increase

[Asia Economy Reporter Lee Jung-yoon] With increasing interest in health, 'zero' beverages are selling like hotcakes, and the new soju product 'Saero' is gaining popularity, propelling Lotte Chilsung to new heights. Furthermore, there is analysis suggesting that the ongoing rise in prices will have a positive impact on the food and beverage industry.

According to Korea Exchange on the 1st, Lotte Chilsung closed at 157,000 KRW, up 1.29% from the previous trading day. The stock price, which was 136,000 KRW at the beginning of last month, has risen more than 15% as of the previous day.

The upward trend is being driven by the Zero series. Since the spread of COVID-19, interest in health and weight management has increased, leading zero-calorie beverages to become a consumer favorite. Sales of zero beverages doubled from 90 billion KRW last year to 180 billion KRW this year, and are expected to grow by more than 50% next year. Market share has also skyrocketed, rising from 5% in 2020 to 43% last year, and reaching 50% in the third quarter of this year.

In the alcoholic beverage sector, the newly launched soju Saero is receiving a hot response. Sales of 80 billion KRW were expected this year, but there are forecasts that even higher performance is achievable. Saero has entered most home-use channels and is expanding into previously unentered entertainment channels, continuously increasing its store penetration rate from the 10% range. Sales of 100 billion KRW are expected next year, and the soju market share, which had fallen to around 15%, is projected to rise to 18%.

In light of this growth, Hanwha Investment & Securities has selected Lotte Chilsung as the top pick in the food and beverage sector. This year’s sales are expected to reach 2.828 trillion KRW. Especially, next year’s sales are forecasted to increase by 7.5% year-on-year to 3.0403 trillion KRW, and operating profit is expected to rise 33.8% to 302.9 billion KRW. SK Securities anticipates sales and operating profit to increase by 9.3% and 9.9%, respectively. Hi Investment & Securities also predicts Lotte Chilsung’s sales and operating profit growth rates next year to be 11.1% and 13.7%, respectively.

Lee Kyung-shin, a researcher at Hi Investment & Securities, stated, "Both the beverage and alcoholic beverage sectors continue to level up their operational fundamentals," adding, "Considering the comfortable direction of operating performance and still reasonable valuation levels, an upward trend in stock price is possible."

Additionally, the ongoing rise in prices is also positive. Price increases can lead to sales growth for food and beverage companies. Lotte Chilsung Beverage raised the shipment prices of some soju products, including Chum Churum, for the first time in February, and from this day, increased prices of beverage products across 10 brands, including coffee, juice, and bottled water, by an average of 4%.