[Click e-Stock] Lotte Chilsung Expected to Miss Q3 Earnings Estimates... Target Price Cut

Gradual Recovery Expected from the Fourth Quarter

On October 7, KB Securities lowered its target price for Lotte Chilsung Beverage from 150,000 won to 140,000 won, stating that the company's third-quarter results are expected to fall short of market expectations due to limited growth in beverage sales and higher costs. However, the firm maintained its 'Buy' investment rating, citing a gradual recovery expected from the fourth quarter thanks to the full impact of price increases and a decline in the exchange rate.

KB Securities analyst Ryu Eunae commented, "Lotte Chilsung Beverage's consolidated revenue for the third quarter is projected to reach 1.0959 trillion won, with operating profit at 79.5 billion won—both expected to fall below the operating profit consensus," adding, "While the beverage segment has seen steady performance in zero-calorie carbonated drinks, energy drinks, and exports, the growth has been limited by pre-price hike demand pull-forward and intensified promotions from competitors."

Ryu added, "In the alcoholic beverages segment, the new soju brand 'Saero' is driving soju sales growth, and RTD (ready-to-drink) sales are expected to grow twofold to reach the 10 billion won range." However, she anticipated, "Due to the full reflection of higher raw material costs and increased fuel prices, standalone profitability is projected to fall by 1.2 percentage points year-on-year to 8.2%."

With regard to overseas subsidiaries, she estimated, "Due to sluggish revenue growth in the Philippines caused by floods and overall cost pressure, sales will reach 387 billion won, with operating profit at 19.1 billion won."

Ryu continued, "Although the business environment remained challenging through the third quarter, the full effect of price increases and the recent drop in the won-dollar exchange rate to around 1,350 won are expected to partially offset cost burdens in the fourth quarter." She further emphasized, "A 10-won increase in the KRW-USD exchange rate is expected to have a positive effect of improving annual operating profit by 3 billion won."

She also added, "Currently, the stock is trading at a forward 12-month P/E ratio in the low 8x range. Considering the gradual recovery in fourth-quarter earnings and the additional upside potential from the development of the Seocho-dong site, this could present a good buying opportunity at a low price."

This content was produced with the assistance of AI translation services.