[Click eStock] "Youngone Corporation, Rebound Expectations Valid This Year"…Target Price Up

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment raised the target price for Youngone Corporation from 47,000 KRW to 49,000 KRW on the 17th, maintaining a 'Buy' rating, as it views the rebound expectations for this year as valid.

Youngone Corporation recorded an operating profit of 48.3 billion KRW in the fourth quarter on a consolidated basis, a 39.4% increase compared to the same period last year, surpassing market expectations of 44.2 billion KRW. Heejin Park, a researcher at Shinhan Financial Investment, stated, "This is thanks to the strong performance of Scott, a major consolidated subsidiary, and cost reduction efforts in the Original Equipment Manufacturer (OEM) segment." He added, "Scott's fourth-quarter sales in KRW are estimated to have increased by more than 40%, showing solid growth following the previous quarter, and operating profit is also estimated to exceed previous forecasts at around 10 billion KRW."

Although confirmation of a full-scale improvement in business conditions is still pending, the expectation of a rebound remains valid. In February, U.S. apparel retail sales and January apparel inventory change rates decreased by 11.3% and 9.8%, respectively, compared to the same months last year. Researcher Park analyzed, "This is a somewhat worsened trend compared to the -10.3% and -9.6% change rates in January and December," adding, "Confirmation of a full-scale improvement in business conditions is still lacking." He further noted, "However, considering the rebound trend due to the COVID-19 base effect that began to be fully reflected from March last year and the current order flow centered on major buyers in the first quarter, the annual OEM order growth rate is estimated at 12.6%."

Scott's annual sales are expected to increase by 4.4% year-on-year, but operating profit is forecasted to decline by 11.7%, considering the base effect from last year's strong performance. First-quarter results are expected to be favorable, with sales and operating profit increasing by 18.6% and 3.4%, respectively.

Researcher Park explained, "Although clear directional confirmation of business condition improvement, such as February's leading indicators, is still lacking, considering Scott's strong first-quarter performance and the improving margin trend in the OEM segment, we have raised the target price by 4.3%."