[Click eStock] "GS Home Shopping, Q3 Operating Profit Up 45% YoY"

Hana Financial Investment Issues 'Buy' Rating and Target Price of 175,000 Won... Closing Price on 17th at 129,400 Won

[Asia Economy Reporter Kum Boryeong] GS Home Shopping's operating profit for the third quarter is expected to increase by 45% compared to the previous year.

According to Hana Financial Investment on the 18th, GS Home Shopping's third-quarter operating profit is estimated to be around 29 billion KRW, a 45% growth compared to the same period last year. The transaction volume is also expected to increase by 5% to 1.039 trillion KRW.

Park Jongdae, a researcher at Hana Financial Investment, analyzed, "Despite the off-season, the prolonged rainy season, weakened travel demand, and increased viewership during the Chuseok holiday have created a favorable business environment. While the gross profit margin (GPM) improved by 0.4 percentage points due to an improved product mix, selling and administrative expenses remained at last year's level due to reductions in business trips, training, and consulting costs, leading to a significant increase in profits."

GS Home Shopping's stock price had declined due to changes in consumer patterns and increased transmission fees caused by the expansion of T-commerce and intensified online competition. Consumer patterns shifted from tangible products like clothing to intangible products like travel, and excluding intangible products such as rental and travel services, the sales growth rate from 2013 to 2019 was close to 0%. However, due to the impact of COVID-19, travel demand is shifting back to tangible product consumption.

Transmission fees also increased by nearly 8% annually on average from 2013 to last year but have stabilized at around 5% year-on-year in the third quarter. Researcher Park said, "GS Home Shopping's GPM was 29.6% in 2013 but dropped to 19.2% last year, and the operating profit margin fell from 4.8% to 2.8%. Although accounting standard changes are a factor, this is mainly because intangible products have much lower GPM. Online competition remains intense, but concerns about changes in consumer patterns and transmission fee increases have considerably eased."

Hana Financial Investment gave GS Home Shopping a 'Buy' rating with a target price of 175,000 KRW, up from the previous target of 136,000 KRW. The closing price on the 17th was 129,400 KRW.