[Click eStock] Hanssem, Lack of Short-Term Momentum

[Asia Economy Reporter Hwang Junho] Yuanta Securities on the 19th set the target price for Hanssem 24% lower than before at 112,000 KRW.

For the expected consolidated performance in the fourth quarter of last year, sales are projected to decline by 1.4% year-on-year to 544.5 billion KRW, and operating profit is expected to plummet 81.8% to 5.4 billion KRW. This is significantly below market expectations.

Due to a decrease in housing sales transactions, remodeling and interior demand have weakened. Profit decline in the online segment due to intensified competition, price increases in raw materials (PB, MDF, etc.), and increased fixed cost burdens due to sluggish sales also affected the poor performance. Compensation related to the change of the largest shareholder (estimated about 18 billion KRW, assuming 7 million KRW per person) was reflected as a one-time factor, which is expected to significantly widen the decline in operating profit. Although capital gains from the sale are expected to be reflected in non-operating income (sale amount 45.5 billion KRW, book value based on separate financials in Q3 last year 15.2 billion KRW, 100% stake), the consolidated results are expected to show only slight improvement due to revaluation effects.

However, as of the end of last year, the number of Rehouse dealerships reached 700, meeting the annual target and continuing the expansion trend of the Rehouse channel. The Rehouse construction workforce also recently showed a renewed increase to about 3,200 people (it takes about six months from hiring to field deployment).

Researcher Kim Giryong of Yuanta Securities said, "We maintain a buy rating on Hanssem but lower the target price from 148,000 KRW to 112,000 KRW, reflecting downward revisions in earnings estimates and multiple adjustments considering growth rates," adding, "due to the largest shareholder's stake sale (27.7%, 1.45 trillion KRW), the appointment of a new CEO at the beginning of the year, and the absence of a growth strategy presentation, short-term transaction contraction, poor performance, and lack of momentum are expected to continue."