[Click eStock] “Shinsegae International, Continuing the Trend of Earnings Improvement”

Hyundai Motor Securities "Maintains Shinsegae International Target Price at 275,000 Won"

[Asia Economy Reporter Gong Byung-sun] Shinsegae International is expected to continue its performance improvement trend in the third quarter of this year. All business sectors are showing steady momentum.

On the 24th, Hyundai Motor Securities estimated Shinsegae International's third-quarter sales at 366 billion KRW, a 9.6% increase compared to the same period last year, and operating profit at 22.9 billion KRW, a 229.0% increase over the same period. The third-quarter operating profit exceeds the market consensus of 21.7 billion KRW by 5.53%. In the second quarter of this year, Shinsegae International's sales and operating profit also increased by 18.6% year-on-year and turned profitable, respectively.

The growth in the imported cosmetics sector is expected to contribute to the third-quarter results. Hyundai Motor Securities estimated Shinsegae International's imported cosmetics sales at 60 billion KRW, a 32% increase compared to the same period last year. Furthermore, with ongoing major brand renewals and brand marketing investments, the profitability of the cosmetics sector is also expected to gradually recover.

The fashion and overseas fashion sectors are also expected to show growth. Although domestic fashion sales to marts are expected to decrease by about 10 billion KRW compared to last year, the overseas brands transferred earlier this year will compensate for the profits. Domestic fashion sales are estimated to increase by 4.6% year-on-year, and overseas fashion sales by 12.6% during the same period.

Sales in the household goods sector are also expected to increase by 4.3% year-on-year to 63.3 billion KRW. This is believed to be due to strategies focused on improving efficiency and profitability. Fixed cost efficiency efforts are ongoing, so profitability improvements in this sector are expected to continue in the second half of the year.

Jeong Hye-jin, a researcher at Hyundai Motor Securities, said, “Although improvements are underway due to the increasing proportion of online channels compared to offline channels, initial tangible and intangible asset and personnel investments related to the expansion of the e-commerce channel are also simultaneously in progress. Once the online channel sales proportion expands to around 20%, the effects of efficiency and profitability improvements will become visible.”

Accordingly, Hyundai Motor Securities maintained its investment opinion of “Buy” and target stock price of 275,000 KRW for Shinsegae International. The closing price on the previous day was 198,500 KRW.