[Click eStock] "Hansae Yes24 Holdings, Vietnam Lockdown Deferral Effect... Earnings Upgrade for Next Year"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 15th that it has raised the earnings forecasts for Hanse Industrial for the fourth quarter of this year and the first half of next year, maintained a buy investment opinion, and increased the target stock price by 14% to 40,000 KRW.

Hanse Industrial's sales in the third quarter of this year decreased by 35% year-on-year to 416.3 billion KRW, and operating profit fell by 64% to 17.9 billion KRW. The lockdown in Vietnam due to COVID-19 caused the factory operating rate to drop to the low teens in August and September, resulting in significant damage. The base effect from the special demand for quarantine products in the third quarter of last year further widened the decline in sales and operating profit. Excluding quarantine products, sales declined by 9% in US dollar terms. The operating profit margin stood at +4.3%, down 3.6 percentage points year-on-year, and there was no seasonal effect.

However, in the fourth quarter, with the reopening of the economy in Vietnam, Hanse Industrial's factory operating rate is rapidly recovering. Among manufacturing items, apparel has relatively simple processes and short production periods, so the recovery of the operating rate is faster compared to other industries and items, leading to a steep improvement in performance. The sales growth rate in dollar terms for the fourth quarter is expected to increase by 18% year-on-year due to the production of orders deferred during the lockdown in the third quarter.

The exchange rate in the fourth quarter is also expected to be more than 4% higher on average, enabling sales in Korean won to grow by about 20% year-on-year. Yu Jeong-hyun, a researcher at Daishin Securities, said, "Despite the rise in raw material prices, recently customers seem to accept other conditions as long as delivery deadlines are met, strengthening the position of large vendors who can respond well to delivery," adding, "It is a good situation to raise expectations for the fourth quarter and 2022 earnings."