[Click e Stocks] Will Fila Holdings Experience Inverse Leverage?

[Asia Economy Reporter Junho Hwang] Meritz Securities maintained the target price for FILA Holdings at 43,000 KRW per share, citing expected increases in costs due to sales decline, distribution changes, workforce expansion, and advertising execution despite business restructuring.

Meritz Securities forecasted FILA Holdings to record sales of 1.0549 trillion KRW and operating profit of 142.9 billion KRW in the second quarter of this year. Sales are expected to increase by 3.5% year-on-year, but operating profit is projected to decrease by 17.8%. Net profit is also expected to decline by 32.1% to 61.5 billion KRW compared to the previous year.

Meritz Securities anticipated negative leverage caused by sales decline due to channel adjustments and cost increases from supply disruptions. In the Korean market, performance deterioration is expected during the transition from wholesale channels such as Coupang and home shopping to retail channels including directly operated stores and the company’s own online mall. In the U.S., the profit decline is expected to widen due to cost burdens and workforce reinforcement amid market contraction.

Hanuri, a researcher at Meritz Securities, stated, "The 12-month forward price-to-earnings ratio (PER) is trading at 12.6 times (excluding Accushnet), which is high compared to high-growth stocks. We maintain a 'buy' rating based on the judgment that stock price appreciation aligned with earnings improvement is possible."