Shinhan Investment Corp. has lowered its target price for Lotte Chilsung Beverage to 145,000 won, a 9% decrease, citing prolonged cost pressures. However, the firm maintained a 'buy' rating, noting positive prospects for domestic recovery and overseas business growth.
In a report released on the same day, analyst Jo Sang-hoon stated, "The valuation is attractive at a 12-month forward price-to-earnings ratio of 11 times, but as domestic growth slows, overseas growth will determine the long-term valuation level."
Jo added, "While we are at the beginning of domestic recovery, overseas growth remains crucial. The company aims to increase its overseas revenue share to 50% by 2030, up from 40% in 2025, which could drive long-term corporate value."
He also noted that previously sluggish overseas operating profits have stabilized thanks to the zero-based budgeting (ZBB) approach.
However, the company's performance fell short of market expectations. Jo reported that in the second quarter of this year, Lotte Chilsung's revenue and operating profit were 1.1129 trillion won and 55.8 billion won, respectively, missing consensus estimates by 11%. He attributed this underperformance to intensified cost pressures from raw materials amid a challenging operating environment both domestically and internationally.
Despite a 1.7% increase in sales for its standalone beverage segment, driven by an 8% growth in zero-calorie carbonated drinks, operating profit declined by 13.2% due to raw material cost pressures triggered by geopolitical risks. Jo assessed that the price increase implemented in July, averaging 5.3%, could help mitigate cost pressures in the second half of the year.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.