Lotte Chilsung Shares Jump 13% on Subsidiary Profitability Outlook

Shares of Lotte Chilsung Beverage (005300.KS) are rising sharply on expectations of improved profitability. Securities firms forecast that the company's earnings will increase next year as overseas subsidiaries reduce costs and boost profits.

As of 10:59 a.m. on January 11, Lotte Chilsung was trading at 145,700 won, up 12.51% from the previous session, according to Korea Exchange. The stock briefly touched 149,900 won during the session, hitting a new 52-week high. Lotte Chilsung shares had remained in the 110,000 won range for an extended period.

Korea Investment & Securities released a report the same day forecasting that profitability improvements at Lotte Chilsung's overseas subsidiaries will begin in earnest next year. The brokerage maintained its "buy" rating and target price of 160,000 won. Lotte Chilsung operates factories worldwide, with its Philippine subsidiary expected to show particularly notable profitability gains. Korea Investment & Securities estimates the Philippine unit's revenue next year will reach 1.1504 trillion won, up 6.4% from this year, while operating profit will surge 120% to 30.1 billion won.

Falling raw sugar prices are also expected to contribute to earnings improvement. Raw sugar prices have been declining recently as production increases in Brazil and India, major sugar-producing countries. Although import prices are rising due to the stronger dollar, raw sugar prices have fallen enough to offset this, resulting in cost savings even in won terms. Brazil and India account for 24.2% and 15.5% of global raw sugar production, respectively, based on last year and this year's figures. Korea Investment & Securities projects Lotte Chilsung's revenue next year will reach 4.2339 trillion won, up 5% from this year, with operating profit rising 25.4% to 234.4 billion won.

"The profitability improvement project that began in 2024 will conclude in the third quarter of 2025, ending one-time expenses such as factory consolidation and leading to full-scale profitability gains," said Kang Eun-ji, an analyst at Korea Investment & Securities. "From a mid- to long-term perspective, expanding overseas bottling operations into new regions could contribute to revenue growth and increase the proportion of overseas sales."