Korea Investment & Securities said on the 18th that as HiteJinro steps up marketing activities while the liquor market remains sluggish, a short-term deterioration in profitability is inevitable. It lowered its target price to 24,000 won, down 17.2% from the previous 29,000 won. HiteJinro's closing price in the previous trading day was 19,320 won.
Kang Eun-ji, a researcher at Korea Investment & Securities, said, "A short-term deterioration in profitability is inevitable due to higher marketing expenses and limited sales growth," and noted, "As the slump in the liquor market has prolonged, marketing activities have been reinforced again from the second half of this year."
According to liquor tax filing statistics, the shipment volume of domestic liquor last year came to 3.15 million kiloliters (kl), down 2.6% from a year earlier. Considering domestic liquor companies' first-half results, Kang assessed that the likelihood of a rebound in this year's liquor market is limited.
He said, "In the mid to long term, the trend of prioritizing health is spreading, and with the resulting continued decline in liquor consumption, the domestic liquor market's growth potential is not large," adding, "Taking into account changes to the marketing expense spending plan, we lowered our annual operating profit estimates for this year and next year by 2.8% and 7.7%, respectively."
However, it maintained a "Buy" investment opinion in consideration of the potential for growth and improved profitability in the overseas soju business through the Vietnam plant, which will begin operating after the second half of next year.