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Photo = Yonhap news |
[Alpha Biz= Kim Sangjin] Korea Investment & Securities reduced its target price for Lotte Chilsung from 180,000 KRW to 150,000 KRW today, continuing a downward trend since it set a target of 200,000 KRW in November 2023.
The firm stated, "We have revised our earnings estimates downward due to slowing processed food consumption, a sluggish dining-out market, and delayed relief from raw material cost pressures. However, the stock's recent correction has increased valuation attractiveness. Furthermore, improvements in PCPPI performance and capacity expansions in Myanmar are expected to boost the proportion of overseas revenue." Lotte Chilsung's overseas revenue share is forecasted to grow from 21.1% in 2023 to 37.6% in 2024 and 39.5% in 2025.
Lotte Chilsung's Q4 2024 revenue is projected to be 908.5 billion KRW, with operating profit estimated at 23.7 billion KRW, missing market consensus by 6.2% and 26.0%, respectively.
Korea Investment & Securities explained, "The unfavorable domestic consumption environment is leading to declining beverage and alcohol sales, reducing revenue. Profitability is also expected to worsen due to persistent raw material burdens, provisions for long-term employee benefits, and other one-time costs."
The firm added, "With the ongoing slowdown in processed food consumption and the dining-out market, it will be difficult for beverage and alcohol product sales to rebound in the short term. Even though the company raised the shipment prices of six product categories, including carbonated drinks and energy/sports drinks, by an average of 6.9% since June, the timing of margin improvement is likely to be delayed."
Although the stabilization of sugar prices is a positive factor, rising exchange rates (KRW/USD) and aluminum costs remain concerns. Additionally, the decline in sales volume is expected to increase the burden of fixed costs.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
