[Click eStock] "2Q Strong Performance by Golfzon, Time to Consider Post-Screen Golf Era"

Strong Performance Even in Off-Season... 2Q Operating Profit Up 113% YoY
Additional Store Openings and Unit Utilization Rate Reach Limits
"Growth Engines Must Be Secured Through Overseas and New Businesses"

Golfzon Screen Golf

[Asia Economy Reporter Minwoo Lee] Golfzon achieved strong earnings in the second quarter of this year as expected, with operating profit more than doubling. Since the growth of the golf market cannot continue indefinitely, analysts suggest that the direction of new businesses such as overseas operations will determine the timing of further growth.

On the 2nd, Meritz Securities maintained its 'Buy' rating on Golfzon with this background and raised the target price by 28.6%. The closing price on the previous trading day was 150,400 KRW.

In the second quarter of this year, the company posted strong results in line with expectations. Consolidated sales reached 105.8 billion KRW, and operating profit was 30 billion KRW, up 46.5% and 113.0% respectively compared to the same period last year. This was in line with market consensus. Researcher Hyojin Lee of Meritz Securities explained, "New store openings were at a similar level to the first quarter, and due to the base effect from social distancing measures, the number of rounds in the second quarter surpassed that of the first quarter, setting another record high. In the third quarter, the number of rounds is not expected to be significantly affected as operations will adapt to the social distancing situation."

Although solid results were achieved even in the off-season, it is now time to consider future growth drivers. Golfzon had experienced rapid growth since 2019. The introduction of the 52-hour workweek contributed to the development of the domestic leisure industry, increasing the golf population. Consequently, new sales increased and the rate per unit also rose, leading to steady revenue growth over three years. However, concerns have been raised that both factors are likely to slow down from 2022. Additional store openings are expected to be significantly limited compared to before, and the current utilization rate per unit is estimated to be about 80%.

Researcher Lee judged that Golfzon’s corporate nature is similar to Coway. Coway grew based on the domestic market while maintaining stable cash flow. Its high dividend yield also supported stock price increases. Currently, Coway is overcoming limitations related to the number of households through overseas expansion and diversification of product mix strategies. Similarly, Golfzon is discovering new growth drivers through overseas business and its advanced swing analysis system, Golfzon Driving Range (GDR).

Lee said, "Golfzon’s stock price has risen 131% over the past six months, already reflecting expectations for growth in the domestic golf market. Given the high stock price increase, the dividend appeal has declined compared to before, so the timing of the next additional rise will be determined by new businesses such as overseas operations."