[Featured Stock] Cowell Fashion Rises 4% on Strong Q3 Earnings Outlook

[Asia Economy Reporter Lee Seon-ae] Cowell Fashion's stock price is on the rise.

As of 9:10 AM on the 17th, Cowell Fashion is trading at 8,030 KRW, up 4.52% from the previous day.

On this day, Shinhan Financial Investment stated that Cowell Fashion is expected to post strong earnings in the third quarter of this year despite the strengthened social distancing measures.

Researcher Lee Haeni said, "Domestic clothing brands are directly affected by the industry's off-season and social distancing," but estimated, "Cowell Fashion's third-quarter sales will increase by 15% year-on-year to 101 billion KRW." Operating profit is estimated to increase by about 27% year-on-year to approximately 19.3 billion KRW.

The reason for the strong earnings outlook is analyzed to be Cowell Fashion's low offline exposure and high proportion of sales from home shopping and online channels.

Attention should also be paid to the start of external growth from the fourth quarter of 2021 due to the inclusion of logistics company Logen Courier as a subsidiary. In July this year, Cowell Fashion established SPC (CF Investment) and completed the 100% acquisition of Logen Courier's shares. The acquisition amount was 340 billion KRW (155 billion KRW externally raised, with the remainder from cash on hand and parent company borrowings).

Researcher Lee said, "From the fourth quarter, Logen Courier's sales will be fully reflected in Cowell Fashion's sales," and "Sales generated by Logen Courier in 2022 are expected to be 589.7 billion KRW." About 85% of Logen Courier's cargo volume is e-commerce, positioning it well to benefit from the rapidly growing domestic courier and e-commerce markets.

Researcher Lee added, "Operating profit will be temporarily impaired due to the inclusion of Logen Courier," but forecasted, "Once vertical integration from product planning, manufacturing, and production to delivery is achieved, operating profit leverage through cost efficiency will be easily realized."

Shinhan Financial Investment expects Cowell Fashion's sales and operating profit this year to increase by 43% and 27% year-on-year to 609.9 billion KRW and 101.8 billion KRW, respectively.