[Click eStock] FILA Holdings Meets Raised Expectations with Strong Earnings

Impact of Surprise Performance of Golf Equipment 'Accushinet'
"Performance Improvement Trend to Continue in 4Q"

[Asia Economy Reporter Minwoo Lee] FILA Holdings posted better-than-expected strong earnings in the third quarter of this year. The surprise performance of the golf equipment company Accusynet was analyzed as a key factor.

On the 16th, Shinhan Financial Investment maintained a 'Buy' rating on FILA Holdings and raised the target price by 22.6% to 65,000 KRW. The previous trading day's closing price was 44,400 KRW. This was based on the judgment that after posting strong third-quarter results, the company would continue to show solid performance in the fourth quarter as well.

FILA Holdings recorded consolidated sales of 917.4 billion KRW and operating profit of 155.6 billion KRW in the third quarter of this year. This represents increases of 5.8% and 24.6%, respectively, compared to the same period last year. These figures significantly exceeded market consensus estimates of 803.2 billion KRW in sales and 85.3 billion KRW in operating profit. The surprise earnings announced by Accusynet on the 6th played a crucial role. Accusynet posted an operating profit of 101.3 billion KRW, far surpassing the previous estimate of 52.0 billion KRW.

However, domestic operating profit including joint venture (JV) commission income was 22.4 billion KRW, down 15.3% year-on-year. Excluding commissions, domestic operating profit was 11.9 billion KRW, a 39.1% decrease compared to the same period last year. Domestic operating profit was similar to previous estimates, while commission income exceeded expectations by about 1.7 billion KRW.

U.S. subsidiary profit was 10.7 billion KRW (-13.5% YoY), exceeding estimates by about 2 billion KRW. This was attributed to favorable sales trends due to the reflection of order delays in the second quarter and the advance booking of orders in the fourth quarter. Royalties amounted to 17.2 billion KRW, down 24.0% compared to the same period last year. Sales of approximately 7 billion KRW from other segments (Hong Kong subsidiary) also contributed to the favorable profits.

Performance improvement is expected to continue into the fourth quarter. Shinhan Financial Investment estimated FILA Holdings' fourth-quarter operating profit at 89.6 billion KRW, a 5.3% increase compared to the same period last year. Heejin Park, a researcher at Shinhan Financial Investment, said, "Although the growth rate may seem somewhat low compared to the surprise third-quarter results, considering that Accusynet's third-quarter performance was exceptional, there is no concern about the earnings direction. Domestic, U.S., and royalty profit and loss in the fourth quarter are expected to improve compared to the previous quarter, with changes of -4.5%, turning to black, and -21.0%, respectively, compared to the same period last year."