April 25, 2024

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[THE INVESTOR] Lotte Chilsung’s earnings in the second quarter will be weighed down by slow beer sales and rising costs, said KB Investment and Securities on July 19, lowering the target price to 1.7 million won (US$1,504) from 1.9 million won.

Its revenue in the period will rise 2.5 percent on-year to 636.4 billion won while operating profit will fall 4.2 percent to 22.9 billion won, missing market expectations for two consecutive quarters. 

The rains in May hurt its sales and costs from beer division increased. Amid shrinking demand for domestic beers, its brands struggled from declining revenue and slow sales despite investing heavily in marketing campaigns, said analyst Park Ae-ran.

It is unlikely to show meaningful improvement in beer sector this year, and projected sales will increase 24.3 percent from last year to 158.5 billion won. It will remain in red with 68.2 billion won operating loss. Factoring in the asset value of its property in southern Seoul and general dividend policy of Lotte Group, however, the analyst maintained a “buy” recommendation. 

By Hwang You-mee (glamazon@heraldcorp.com)