[Click eStock] "Hansome, Everything Is Good Except the Stock Price"

2Q Operating Profit 23.5 Billion KRW... 66% Increase YoY

[Asia Economy Reporter Minwoo Lee] Handsome posted strong earnings in the second quarter of this year, surpassing market consensus. Although the stock price has shown somewhat sluggish performance, there is analysis that it can grow further as new sales from the cosmetics business and the passing of the clothing consumption off-season take effect.

On the 17th, Shin Young Securities maintained its 'Buy' rating and target price of 60,000 KRW for Handsome, citing these factors. The closing price on the previous trading day was 39,550 KRW.

Handsome recorded consolidated sales of 312.7 billion KRW and operating profit of 23.5 billion KRW in the second quarter of this year. These figures represent increases of 13.04% and 66.38%, respectively, compared to the same period last year. The operating profit also exceeded market expectations by 9.91%. Following the first quarter, the company continued to deliver solid results by surpassing market expectations in the second quarter as well. Notably, despite a slowdown in growth rates in women's suits and women's casual segments centered on department stores due to base effects starting in May, the growth trend continued.

Jeong-yeon Seo, a researcher at Shin Young Securities, explained, "Handsome continued a growth trend exceeding the average growth rates of major channels, achieving double-digit growth in the second quarter. In particular, the gross profit margin improved by 0.8 percentage points year-on-year in the second quarter, as online sales proportion steadily increased and offline channel sales also recovered."

With the vacation season over, a recovery in fashion demand is expected. Last month, offline channels were again constrained due to the fourth wave of COVID-19, and this month’s overlapping vacation season created an unfavorable external environment. Nevertheless, Handsome’s products are high-end brands with few domestic substitutes, resulting in a loyal customer base. The cosmetics brand, which has been prepared for over a year, is scheduled to launch at the end of this month. It will first be released online and then enter major department store locations. Although marketing expenses will be incurred accordingly, they are not expected to burden earnings significantly.

Researcher Seo assessed, "Although the third quarter is an off-season and may impact earnings, the annual burden will not be significant. As the vacation season ends and vaccination rates increase, leading to a decrease in confirmed cases, fashion demand is also expected to recover."