[Click eStock] "Hite Jinro Expected to Recover Market Share"

On May 16, Shinhan Investment Corp. stated that it expects profitability improvement for Hite Jinro due to the company's efforts to optimize marketing expenses. The firm maintained its "Buy" investment rating and a target price of 27,000 won.

In the first quarter of this year, Hite Jinro posted sales of 612.8 billion won and operating profit of 62.7 billion won. Compared to the same period last year, sales decreased by 1.3%, while operating profit rose by 29.7%. Although overall sales volume was disappointing amid sluggish domestic consumption, the company achieved cost savings of 16.3 billion won through more efficient marketing spending.

Shinhan Investment Corp. analyst Cho Sanghoon explained, "Beer sales volume was weak due to sluggish consumption and increased demand ahead of competitor price hikes, resulting in a 55% decline in operating profit. In contrast, soju operating profit increased by 54% as market share recovered to 69%, despite weakness in the overall market."

On May 28, Hite Jinro will raise beer prices by an average of 2.7% for the first time in a year and a half, citing increased costs of key raw materials. However, prices for certain items, such as 500ml cans?which have a high share in the home channel?and happoshu, will remain unchanged.

Regarding this, analyst Cho estimated, "The increase in operating profit from the price hike is projected to be 11 billion won annually." He added, "While the price increase provides short-term relief, future valuation levels will depend on increases in sales volume and market share."