[Click eStock] "Shinsegae International, Expecting Recovery in Cosmetics and Apparel Performance"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on Shinsegae International on the 2nd and raised the target price by 2% to 220,000 KRW. This is based on the judgment that although sales in cosmetics and domestic apparel sectors were sluggish last year due to the impact of COVID-19, growth will resume this year.

Consolidated sales in the fourth quarter of last year were 383.6 billion KRW, down 4% compared to the previous year. Operating profit recorded 17.4 billion KRW, a 20% decrease. Cosmetics sales increased by about 3%, as imported cosmetics sales grew by 60% compared to the same period last year despite sluggish domestic duty-free channel sales. The imported apparel sector showed solid growth, but domestic apparel sales declined by about 19% due to delayed consumer recovery. Shin-ae Park, a researcher at KB Securities, explained, “Sales of imported cosmetics and imported apparel exceeded expectations, but the daily necessities brand Jaju posted weaker-than-expected results.”

This year, sales are estimated to grow 9% year-on-year to 1.4999 trillion KRW. Operating profit is expected to increase by 117% to 73.1 billion KRW. Cosmetics sales are projected to grow by 18%, and operating profit is expected to rise by 65% to 54.7 billion KRW, significantly contributing to the company’s revenue expansion. This year, the new brand ‘Swiss Perfection’ will also expand its domestic and overseas stores.

Domestic apparel sales are expected to grow by 7%, supported by consumer recovery and a low base effect, and operating losses are forecasted to narrow to 9.9 billion KRW. The daily necessities sector is expected to reduce its annual deficit to 2.5 billion KRW compared to the previous year, due to traffic recovery and restructuring of some stores.

Researcher Park Shin-ae said, “The stock price has already risen about 34% over the past four months, reflecting expectations of improved performance,” adding, “Further increases are expected to occur after a trend of improved sales and profits becomes evident.”