Clothing OEM Stocks' 'Hwaryeohan Nalgaetjit' Soar

Clear Signs of Business Recovery... Significant Gains for Youngone Trading and Hansae Yes24

[Asia Economy Reporter Park Jihwan] The stock prices of clothing Original Equipment Manufacturer (OEM) companies, which struggled last year due to the spread of COVID-19, have risen significantly this year.

According to the Korea Exchange on the 24th, Youngone Corporation surpassed 40,000 KRW yesterday, closing at a new 52-week high. Youngone's stock price has risen 27.6% since the beginning of the year. Hansae Co., Ltd. has also seen an 18.3% increase since the start of the year. The recent rebound in these OEM companies' stock prices reflects clear signs of industry recovery. As the number of COVID-19 cases in major consumer countries such as the U.S. and Europe sharply declines, and with expectations that lockdown measures in European countries will be lifted next month, optimism about improved earnings is being factored into stock prices. Daishin Securities estimated last year’s operating profits for Hansae and Youngone at 66 billion KRW and 256 billion KRW, respectively, representing increases of approximately 11.9% and 7.6% compared to the previous year.

Youngone benefited from the rapid recovery of the sportswear market last year. While general apparel consumption, which returns as people resume daily life, is still slow to recover, personal sports demand has been increasing more rapidly during the pandemic. The expansion of the sportswear market itself due to COVID-19 is expected to continue positively impacting this year. Additionally, the growth of Scott, a Swiss bicycle brand in which Youngone holds a 50% stake, also contributed. Scott recorded a 29% year-on-year sales growth in the fourth quarter of last year.

Hansae enjoyed a COVID-19 boom last year with a significant increase in orders for protective gear such as coveralls and masks. Furthermore, with retail sales in the U.S. rapidly recovering in the first quarter of this year, orders from the U.S. are expected to increase by about 15%. Hansae’s major clients include large U.S. retailers, making its performance closely linked to the U.S. retail market conditions. KTB Investment & Securities analyst Kim Daesong stated, "Considering the industry recovery and base effects, Hansae’s earnings growth trend could continue through the first half of this year." Hansae’s operating profit for this year is projected to increase by about 30% from the previous year to 84 billion KRW.

The securities industry views clothing OEM stocks as still undervalued. In the case of Youngone, it is considered undervalued compared to its competitor, Taiwan’s Eclat, which has a price-to-earnings ratio (PER) of 25 times. Currently, Youngone’s PER is around 8 times. Park Hyunjin, a researcher at DB Financial Investment, explained, "Among OEM companies, despite maintaining stable earnings, the PER not even reaching 10 times suggests that it is undervalued compared to global peers in the same industry."