[Click e-Stock] Rising Packaging Costs and Exchange Rates Increase Profit Volatility for This Stock

LS Securities has lowered its target price for Lotte Chilsung from 160,000 won to 150,000 won, while maintaining its buy rating.

On June 11, Park Seongho, a researcher at LS Securities, stated, "Given concerns over packaging material costs and the burden of a high exchange rate, it is crucial to reduce cost pressures." He added, "While annual profit improvement appears possible based on cost efficiency effects, profit volatility is expected to increase from the second quarter of this year due to high oil prices and a strong exchange rate."

Park explained, "In the second quarter of this year, the average price of aluminum futures rose by 48% compared to the same period last year, pushing the price of aluminum cans—which account for a high proportion of packaging material costs—to a historical high." He continued, "Although the company is minimizing cost pressures through the introduction of alternative raw materials and purchasing efficiency, it will be inevitable that some impact from rising costs is reflected." He also noted, "The exchange rate remains elevated and continues to be a burden on profitability."

Sales continue to show a low-growth trend. Park commented, "Zero-calorie carbonated drinks and energy drinks are showing solid sales trends, but the pace of recovery in other categories remains sluggish." He added, "The alcoholic beverage business is also growing, mainly centered on Saero Soju, but the recovery in demand for some product groups remains limited."

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