[Click eStock] "Ecomarketing Expected to Benefit from Andar's Sales Growth"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 32,000 KRW for Eco Marketing on the 4th. This is based on the judgment that sales growth will continue in the second half of the year, supported by the growth of Andar, which was recently acquired.

In the second quarter, sales recorded 62.1 billion KRW, a 20% increase compared to the same period last year. Operating profit decreased by 57% to 8.8 billion KRW. Based on the advertising agency business division (separate), sales and operating profit recorded 12.8 billion KRW and 5.9 billion KRW respectively, down 25% and 43% from a year ago due to increased major media costs and the negative base effect of Gluga.

Subsidiary Daily&Co is beginning to expand from sales boosting to a business boosting model through new businesses classified under the marketing division. However, due to an increase of about 137% in advertising expenses (23.9 billion KRW) including Andar, global platforms, and Mongje's TV commercials compared to last year, the company posted sluggish results.

Since the end of May, Andar (56% stake), which was consolidated, recorded sales and operating profit of 11.8 billion KRW and 400 million KRW respectively, marking a 46% increase and a return to profitability. Kihoon Lee, a researcher at Hana Financial Investment, said, “Andar recorded operating losses of 8.9 billion KRW and 12.2 billion KRW in 2019 and last year respectively, with stagnant sales, but after acquisition, through targeted marketing, the cumulative half-year sales growth rate reached 68%.” It is analyzed that profitability turned positive from June, when consolidation began, through efficiency improvements in low-profit offline stores, focus on its own mall, and efficiency in inventory and labor costs.

If this pace continues, Andar's sales and operating profit in the second half are expected to reach 100 billion KRW and 7.5 billion KRW respectively. Researcher Lee said, “Previously, Andar's expected sales for 2023 were forecasted at 200 billion KRW, but if the current improvement pace is maintained, sales of 240 billion KRW in 2022 can be achieved.”

He added, “Considering Andar's growth, the leverage effect where sales growth covers cost increases has been confirmed, so the stock price will continue to rise,” and “Operating profit is estimated to reach around 80 billion KRW next year.”