[Click eStock] "'Earnings Surprise' GS Home Shopping, Strong Q1 Performance Expectations Rise"

Eugene Investment & Securities Report

[Asia Economy Reporter Minji Lee] Opinions have emerged that GS Home Shopping will continue to show strong performance in the first quarter. Accordingly, Eugene Investment & Securities maintained a buy rating and a target price of 180,000 KRW for GS Home Shopping on the 8th.

In the fourth quarter of last year, GS Home Shopping recorded transaction volume and operating profit of 1.1806 trillion KRW and 46.2 billion KRW respectively, marking increases of 9.2% and 57.1% compared to the same period last year. Researcher Younghoon Joo of Eugene Investment & Securities said, “Due to the resurgence of COVID-19, the time spent at home has increased, creating a favorable operating environment for home shopping companies, and it is estimated that the results exceeded market expectations (40 billion KRW).”

Despite the negative impact of the Chuseok holiday on home shopping sales, the transaction volume growth rate recorded about 10%, which is positive. Although the decline in clothing, a high-margin category, due to reduced demand for outings negatively affected the margin rate, most other categories showed strong performance, so it is not considered a matter of concern.

The selling and administrative expense ratio decreased by 1.5% compared to the same period last year, which also contributed to the earnings surprise. As cost efficiency measures are underway and transaction volume has significantly increased, the effect was maximized. The increase in transmission fees, which is considered a risk factor for home shopping companies, also appears to have been minimal.

In non-operating areas, similar to the third quarter, an evaluation loss of about 3 billion KRW on non-current financial assets due to exchange rate effects was reflected. However, this does not indicate a decline in the actual value of investment assets.

Researcher Younghoon Joo explained, “Since the operating situation in January also showed good results similar to the fourth quarter, first-quarter performance can also exceed expectations.” He added, “It is regrettable that the improved performance and dividend attractiveness have not yet been reflected in the short-term stock price since the merger price and ratio (1 to 4.2237) with GS Retail were decided on November 10 last year,” and said, “Once the post-merger strategy is specifically presented, these issues will be resolved.”