[Click eStock] "Hansae Yes24 Holdings, Better Q4 Performance"

[Asia Economy Reporter Ji-hwan Park] Korea Investment & Securities stated on the 30th that Hanse Industrial is expected to deliver strong performance in the upcoming 4th quarter due to favorable demand and supply conditions. The investment opinion 'Buy' and the target price of 34,000 KRW were maintained.

Hanse Industrial's 4th quarter sales in dollar terms are expected to increase by 24% year-on-year as the supplier-dominant market within the apparel sector continues. The inventory change rate of Original Equipment Manufacturers (OEMs) can be considered a leading indicator of sales changes, as inventory levels of raw materials and others vary depending on the order volume for the next quarter. Hanse Industrial's 3rd quarter inventory rose 16% year-on-year to 340 billion KRW, marking the highest level among past 3rd quarters. It is anticipated that demand will remain solid due to new orders and orders deferred from the 3rd quarter. Ha-kyung Park, a researcher at Korea Investment & Securities, said, "In November, Hanse Industrial's Vietnam operation rate recovered to 90%," adding, "Strong re-stocking demand and production normalization are expected to enable double-digit sales growth through the first quarter of next year."

Although customer guidance was downgraded, one of the key customers, GAP, reported 3rd quarter sales and operating profit of 3.94 billion USD and 150 million USD respectively, representing decreases of 1% and 13% year-on-year. The sales decline in the 3rd quarter due to supply chain issues was about 300 million USD, and the annual impact on sales is expected to reach between 550 million and 650 million USD.

However, the analysis emphasizes that the downgrade is due to supply disruptions rather than demand slowdown. Researcher Ha-kyung Park stated, "Rather than the downgrade of key customers' guidance itself, attention should be paid to the cause of the downgrade being supply disruptions and cost increases, not front-end demand slowdown," adding, "This means that deferred orders and waiting demand are strong, and buyers are taking volumes while sharing cost burdens."

He said, "From the OEM's perspective, sales are increasing with solid orders while profitability is also guaranteed," and "Strong re-stocking demand was confirmed through the 3rd quarter results." He further added, "Although uncertainties related to variant viruses exist, due to the rise in Vietnam operation rates, the 4th quarter is expected to show exceptional strong performance despite being the OEM off-season."