[Click eStock] "FILA Holdings, Slow Recovery Expected in Second Half"

Shinyoung Securities Report

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating and a target price of 64,000 KRW for Fila Holdings on the 17th.

Fila Holdings' consolidated sales and operating profit for the second quarter were 1.0194 trillion KRW and 173.8 billion KRW, respectively, representing increases of 63.1% and 245.6% compared to the same period last year. Following the first quarter, the strong performance of the Acushnet corporation continued to drive the company's consolidated results.

By major business entity, Fila Korea's standalone sales were 136.9 billion KRW, down 3.7% from a year earlier, and operating profit decreased by 1.1% to 27.7 billion KRW. The Chinese corporation's sales increased by 26.4%, while the U.S. corporation recorded sales of 113.53 million USD, up 101.1% in dollar terms. Acushnet also posted sales of 624.85 million USD, an increase of 108.3% compared to a year ago. Royalty income rose 55% to 15.36 million USD.

Seojeong Yeon, a researcher at Shin Young Securities, said, "Domestic business is seeing increased contributions from online and new wholesale sales, and sales of new brands with higher average selling prices are progressing smoothly. However, the slow recovery of existing offline wholesale channels and the impact of the COVID-19 resurgence in the third quarter are concerns." The U.S. corporation showed weak profitability despite sales growth due to rising cost ratios and logistics expenses. Global royalty income was solid compared to initial expectations, thanks to strong performance in the EMEA region, raising hopes for a recovery to pre-COVID-19 levels.

Currently, Acushnet is significantly supporting the company's performance, but the base effect is expected to increase in the second half of the year. Furthermore, the slow recovery of existing businesses outside of China is expected to delay the restoration of trust in brand competitiveness. Researcher Seo analyzed, "The company is striving to turn adversity caused by COVID-19 into an opportunity by renewing its brand and transforming product competitiveness to levels exceeding those before the pandemic. Although the impact on performance will continue for some time, this is necessary time for mid- to long-term corporate value enhancement."