[Click eStock] "Shinsegae International Expected to Miss Q3 Earnings Estimates... Target Price Up"

[Asia Economy Reporter Song Hwajeong] KTB Investment & Securities on the 13th revised down the target price of Shinsegae International from 270,000 KRW to 230,000 KRW, anticipating that the company's Q3 earnings this year will fall short of market expectations. The investment rating was maintained as 'Buy.'

KTB Investment & Securities estimated Shinsegae International's Q3 performance at 356.6 billion KRW in sales, a 7% increase compared to the same period last year, and operating profit of 16.8 billion KRW, up 141%. Researcher Baesongyi said, "We expected an improvement in profitability in domestic fashion and lifestyle sectors, but due to strengthened social distancing and off-season discount sales, an operating loss is expected." He added, "It seems necessary to slow down the pace of structural improvements in these sectors, and due to earnings uncertainty, short-term stock price momentum is limited."

Domestic fashion is estimated to have sales of 73.7 billion KRW, a 1% increase year-on-year in Q3, with an operating loss of 4.4 billion KRW. Researcher Bae analyzed, "As the decline in the Emart brand expanded, a hit to the top line is expected, and profitability worsened due to increased discount sales of women's wear." He added, "Although structural improvements were underway through an online mix, the off-season caused a setback."

Lifestyle is estimated to have sales of 65.5 billion KRW, up 8%, with an operating loss of 1.2 billion KRW. While online-centered growth remains effective, offline channels showed weakness, and one-time interior costs were also reflected, adding to the burden.

On the other hand, overseas fashion continues to perform well. Q3 sales are expected to increase by 15% to 109.5 billion KRW, with operating profit rising 163% to 14.6 billion KRW. Researcher Bae said, "Strong demand for overseas brands continues, and among the MZ generation (Millennials + Generation Z), preference for niche luxury brands is rising." He added, "Considering the high rate of full-price sales, operating profit margin is expected to exceed 10% for four consecutive quarters."

Researcher Bae added, "The new cosmetics business Swiss Perfection is expanding smoothly, and with the sustained strength in overseas fashion, the sharp stock price drop means valuation is not a burden."