[Click eStock] "HiteJinro, Soju Sales Recovery... Target Price 28,000 Won"

Daishin Securities maintained its target price of 28,000 KRW and a buy rating for HiteJinro on the 14th.

Although HiteJinro's soju sales had contracted due to the success of competitors' new soju products, the company significantly recovered market share in the second quarter compared to the market. In the second half of the year, soju sales are expected to continue expanding from a low base, and the contraction of the beer market will likely limit the intensity of competition during the peak season. Additionally, with continued marketing cost reductions, an improvement in earnings is anticipated.

In the second quarter, consolidated sales reached 665.2 billion KRW, and operating profit was 68.2 billion KRW, significantly exceeding consensus estimates. The improvement in operating profit margin was attributed to the recovery in soju sales volume and marketing cost reductions.

Soju sales revenue increased by 8.4% year-on-year due to growth in sales volume and price hikes. Both Chamisul and Jinro saw increased sales, with domestic soju sales estimated to have grown by 5%. Soju exports, including fruit soju, showed strong growth as inventory adjustments from product renewals conducted in the previous quarter were completed. A factory is under construction in Vietnam, targeting operation by 2026, which is expected to boost overseas sales in the future. Although margin was damaged by a 40% increase in the price of ethanol, which accounts for 40% of soju production costs, in April last year, the price hikes implemented at the end of last year and leverage effects from increased sales volume led to an improvement in soju operating profit margin by 9.3 percentage points year-on-year to 14.4%.

Beer sales volume declined by double digits due to market contraction and a high base effect from last year's Kelly launch. The price increase effect was partially offset, resulting in a 2.3% year-on-year decrease in sales revenue. Some impact on shipment volume decline was attributed to quality enhancement efforts following a recall of certain HiteJinro products. Sales recovery is expected as the seasonal peak season begins in the second half. Despite the decline in beer sales, marketing expenses, which had temporarily increased last year, normalized, allowing beer operating profit margin to turn positive at 5.0% despite the sales decrease.