[Click eStock] Golfzon, Concerns Over Earnings Peak-Out Are Premature

SK Securities Report

[Asia Economy Reporter Minji Lee] SK Securities maintained its buy rating and target price of 200,000 KRW for Golfzon on the 19th. This is based on the expectation of improved performance due to an increase in franchise stores, device sales, and screen golf round revenue.

Golfzon's sales in the second quarter are estimated to grow 23% year-on-year to 130 billion KRW. Operating profit is expected to increase by 33% to 40 billion KRW, with an operating margin of 30.8%. The number of franchise stores increased by 120 in the second quarter, following 136 in the first quarter, showing strong performance, which is expected to boost sales of Golfzon systems.

Sales of the GDR system, which began external sales this year, are estimated to have reached 13.4 billion KRW, surpassing the first quarter's 13.1 billion KRW, driven by the expansion of the golf lesson population. Despite being the off-season with more outdoor activities, the number of screen golf rounds is estimated to be similar to the record-high first quarter, due to the lifting of sales restrictions in the metropolitan area and an increase in new franchise stores.

The cumulative number of Golfzon integrated members is estimated to have exceeded 4 million in the second quarter, up from 3.33 million in the first quarter of last year and 3.9 million in the first quarter of this year. Although a recovery in overseas exports was expected, it is projected to remain at the previous quarter's level due to ongoing COVID-19 lockdowns in China and logistics issues.

Yoon Hyuk-jin, a researcher at SK Securities, said, "The increasing golf population and soaring green fees paradoxically increase the necessity of screen golf," adding, "This leads to growth in franchise stores, GDR device sales, and screen golf round revenue."

Although competitor Friends Screen stores are also increasing, Golfzon Park franchise stores continue to grow based on the increase in integrated members. Researcher Yoon explained, "Despite the stock market plunge causing Golfzon's stock price to fall more than 20% from its peak, strong performance continues," and added, "It is currently undervalued with a PER of 7.8 times based on this year's earnings."