[Click eStock] "Shinsegae International, Overseas Fashion and Cosmetics Divisions Perform Well"

Daishin Securities Report
Target Price Up 44%

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Shinsegae International on the 15th and raised the target price by 44% to 26,000 KRW. This is attributed to the upward adjustment of the price-to-earnings ratio (PER) to 24 times, considering the increased valuation of the cosmetics sector.

Yoo Jeong-hyun, a researcher at Daishin Securities, explained, “Although the domestic fashion and lifestyle sectors are expected to remain sluggish for the time being, the overseas fashion and cosmetics sectors continue to show strong performance,” adding, “The high growth and high-margin structure of overseas fashion and imported cosmetics are key to improving earnings.”

Second-quarter sales and operating profit are expected to reach 307.5 billion KRW and 16.4 billion KRW, respectively, representing a 7% growth and a return to profitability compared to the same period last year. The company’s flagship cosmetics brand, ‘Vidi Vici,’ is recording monthly sales of 7 billion KRW, and imported cosmetics continue to show high sales growth following the first quarter. Accordingly, the operating profit margin (OPM) of the cosmetics division is expected to remain in the low double digits around 10%, similar to the first quarter.

With a significant increase in consumption, overseas fashion sales are also expected to continue their strong trend. Researcher Yoo Jeong-hyun stated, “In the context of consumption polarization and rising preference for premium brands, the increase in full-price sales rate will continue to drive earnings improvement,” adding, “Domestic fashion is expected to see an expanded contraction due to the downsizing of the Days brand business.”

Yoo further analyzed, “Although the resilience of in-house brand performance is somewhat disappointing, the ability to develop imported brands and high profit margins in the fashion and cosmetics categories will drive earnings improvement this year,” and “2022 will continue the momentum of earnings improvement through the recovery of the previously weak domestic segment’s profitability.”