[Click eStock] "HiteJinro, Marketing Costs Expected to Rise Amid Intensified Competition"…Target Price ↓

On the 5th, IBK Investment & Securities lowered the target price for HiteJinro from 38,000 KRW to 28,000 KRW, citing expectations that fierce competition in the alcoholic beverage market will continue for the time being, leading to increased marketing expenses. However, if Kelly settles smoothly in the market this year, it is expected not only to achieve significant market share expansion but also to strengthen the stability of the beer business in the mid to long term, so the investment opinion was maintained as a buy.

HiteJinro's consolidated sales for the second quarter of this year are estimated at 654.6 billion KRW, a 1% increase compared to the same period last year, while operating profit is expected to decline by 35% to 40.6 billion KRW, falling short of consensus estimates.

Since the launch of Kelly on April 4, aggressive marketing activities to secure early market settlement are expected to continue, and in the recent intensifying competition within the soju market, it seems inevitable to invest costs to defend market share as the leading player.

By segment, beer sales are projected to increase by 13.6% year-on-year to 231.1 billion KRW, while operating profit is expected to decrease by 72.6% to 3.7 billion KRW. Demand is anticipated to expand due to the Kelly launch effect and early warm weather. In fact, sales volume increased by about 27% in April and about 10% in May. Kim Taehyun, a researcher at IBK Investment & Securities, explained, "Although sales of Terra are expected to decline due to cannibalization effects, the overall beer sales volume is showing an upward trend, so it is not considered a concern. Also, as consumer preference for Japanese beer improves, imported beer sales such as Kirin Ichiban are expected to perform well."

Soju sales are forecasted to decrease by 6.5% to 365.5 billion KRW, and operating profit is expected to decline by 20.6% to 35.8 billion KRW. Researcher Kim added, "Last May and June, there was a surge in demand due to the Cargo Solidarity strike issue, which caused a significant increase in sales volume, so a base effect is expected to cause a decline in sales. From April, the increase in ethanol prices has been reflected, causing cost burdens, and there seems to be a high possibility of increased selling and administrative expenses such as advertising and sales promotion costs due to intensified competition in the soju market."