As Lotte Chilsung's overseas subsidiary performance enters a stabilization phase, analyses suggest it is the key to a rebound in stock prices. On the 5th, six securities firms that released related reports adjusted their target price for Lotte Chilsung upward. On the previous trading day, Lotte Chilsung's stock price was 134,800 won.
On the same day, NH Investment & Securities and Hyundai Motor Securities raised their target stock price for Lotte Chilsung from 150,000 won to 170,000 won. The increasing contribution of overseas subsidiaries to performance and the anticipated expansion of valuation were key factors.
In addition, Shinhan Investment & Securities (140,000 → 160,000 won), Hanwha Investment & Securities (140,000 → 160,000 won), iM Securities (150,000 → 160,000 won), and IBK Securities (155,000 → 160,000 won) also increased their target price for Lotte Chilsung.
In the second quarter of this year, Lotte Chilsung's consolidated revenue decreased by 1% year-on-year to 1.0873 trillion won, while operating profit increased by 4% to 62.4 billion won. The revenue from domestic beverages and alcohol segments fell by 9% and 7%, respectively, compared to the same period last year.
In the second half of the year, there is a possibility that domestic consumption will improve due to the distribution of people's livelihood recovery consumption coupons. It is estimated that about 28% of the funds from these coupons will flow into public restaurants and convenience stores closely related to Lotte Chilsung.
Unlike in Korea, overseas subsidiaries showed significant improvements in performance across the board. Joo Young-hoon, a researcher at NH Investment & Securities, noted, "The operating conditions of the Myanmar entity, which had been sluggish due to temporary raw materials supply issues in the first quarter, normalized and saw the greatest improvement." It is expected that the profitability improvement efforts of the Philippine entity will finish, leading to an improvement in operating profit margin to about 3% next year.
Jo Sang-hun, a research fellow at Shinhan Investment & Securities, said, "As domestic growth rates slow, overseas growth potential will determine mid to long-term valuation levels," adding, "In particular, Philippine Pepsi serves as a production base for the expansion of beverages and soju into Southeast Asia and is a factor for valuation reassessment."