[Click eStock] “F&F, Solid Earnings Improvement” (Update)

China Subsidiary's Q4 Sales Expected to Increase 250% YoY
Hana Financial Investment Maintains F&F Target Price at 1.2 Million Won

[Asia Economy Reporter Gong Byung-sun] All business divisions of F&F are expected to continue solid performance. In particular, there is a noticeable improvement in performance in China.

On the 14th, Hana Financial Investment estimated F&F's Q4 sales last year to be 552.2 billion KRW, a 60% increase compared to the same period last year, and operating profit to be 160.6 billion KRW, a 123% increase over the same period. Among the sales, pure domestic sales are expected to have increased by 63%, and duty-free sales by 60%.

All business divisions are expected to show growth. Due to the peak season effect for apparel, MLB and Discovery's pure domestic sales in Q4 last year are estimated to have increased by 63% to 75.2 billion KRW and by 17% to 212 billion KRW, respectively, compared to the same period last year. As a result, total pure domestic sales are expected to have increased by 63% compared to the same period last year.

Overseas expansion is also positive. Sales of the Chinese subsidiary are expected to have increased by 250% to 151.5 billion KRW compared to the same period last year. Additionally, as of the end of last year, the number of stores in China was identified as 494, which is an increase of 419 stores compared to the previous year. Due to strong sales of high-margin winter products and high growth of the Chinese subsidiary, the operating profit margin in Q4 last year is estimated to have improved by 8.2 percentage points to 29.1% compared to the same period last year.

Seohyun Jeong, a researcher at Hana Financial Investment, said, “The number of stores in China is expected to increase to a cumulative 800 this year,” and “Even with conservative assumptions, the Chinese subsidiary’s sales this year are expected to reach 726.7 billion KRW, an 89% increase compared to the previous year.”

Accordingly, Hana Financial Investment maintained its investment opinion of ‘Buy’ on F&F and a target stock price of 1.2 million KRW. Researcher Seo explained, “If MLB, the core fundamental division of F&F, maintains its brand power in China, the medium- to long-term growth potential remains valid,” adding, “Differential growth compared to the domestic market and business expansion through the acquisition of Tailormade are factors that increase medium- to long-term investment value.” The closing price on the previous day was 908,000 KRW.