There are only a few sectors that are able to resist falling into pieces with the current global economic situation and the staggering fall in oil prices. The distillery sector is one of them.
With most consumer products and alcoholic beverages proving to be highly integrated into society, the one component that is included in many all of them – alcohol – is proving to be an essential ingredient. With its necessity in the current world, many alcohol-related industries, sectors, and products are mostly immune to volatile markets.
InvestAsian would like to bring your attention to Korea. One of its trademark products is a traditional alcoholic drink called Soju.
Further research into Korea’s most popular drink, Soju revealed that despite the downturn of the economy, Soju related companies are doing well. For example, the leading Soju producer, HITE-Jinro, is expecting higher profits in 2016. A possible explanation could be that more of the population are becoming consumers of Soju due to tough economic times.
However, the company in the limelight today is not HITE-Jinro itself, but another company of a similar name higher up the supply chain: Jinro Distillers Co., Ltd (KOSDAQ:018120)
Jinro Distillers Co., Ltd.
A Korea-based company engaged in the manufacture of ethanol, Jinro produces fermented and refined ethanol used as raw materials for alcoholic beverages. It does not restrict itself in the business of supplying necessary materials for distilled spirits, but also engages itself in the manufacturing of alcohol disinfectants, both household and industrial.
Jinro is in a great place to continue supplying the world with the raw materials for Korea’s favorite alcoholic beverage. With a long term debt to asset ratio of just 0.54, the company is in no danger of not being able to pay back its obligations and is in a position to take on more long term debt should it choose to expand aggressively.
Jinro’s Attractive Valuation is Helped by its Obscurity
The company boasts very impressive margins and operating metrics – perhaps because of the fact that Jinro is practically unknown to global investors, and few have noticed it.
With the highest net profit margin of 19% in the distillery sector, Jinro is way ahead of the closest competitor which has only 10%. Jinro is also leading the pack with its sales growing at a rate that is more than 3 times the industry’s.
Jinro’s returns have also been second to none. With ROA over 22%, ROI over 25%, and ROE over 27%, the company is giving a lot back to shareholders who have enjoyed a dividend yield that is at least twice the sector’s over 5 years.
It also boasts a P/E ratio of just 14, one of the lowest in the industry.
With strong fundamentals, strong financial performance, and strong products to keep the population strong against discouraging times, Jinro distilleries Co., Ltd. is highly recommended selling at a price of only 31,700 KRW which is just 60% of its peak price of 50,700 KRW just a few months ago.