[Click eStock] Shinsegae International Smiles Despite High Inflation, High Exchange Rates, and High Interest Rates

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained its buy rating and target price of 42,000 KRW for Shinsegae International on the 21st.

Shinsegae International's sales in the second quarter are estimated to grow 12% year-on-year to 380 billion KRW. Operating profit is expected to increase by 29% to 34.1 billion KRW, meeting market expectations. Ji-yoon Jung, a researcher at NH Investment & Securities, said, "The high interest rate, high inflation, and high exchange rate environment are working favorably," adding, "The depreciation of the Korean won led to a continuous improvement in cost ratio due to the exchange rate spread difference between purchase cost and sales price timing."

Sales in the fashion sector are expected to grow 16% year-on-year to 199.6 billion KRW, with operating profit increasing 51% to 24.1 billion KRW. Due to the preference for small luxury items, sales growth of imported brands remains solid at 23% compared to a year ago, and domestic brands such as Bob and J. Cut are expected to grow 4% during the same period.

Domestic cosmetics sales are expected to grow 3% year-on-year to 83.8 billion KRW, while operating profit is forecasted to decline 11% to 6.9 billion KRW. Imported brands maintain a growth rate of 20%, and despite the base effect on Vidi Vici, the company's own brands are also growing, with cosmetic profit margins expected to be around 8%.

Subsidiary Tomboy's sales are estimated to increase 7% year-on-year to 24.5 billion KRW, and operating profit is expected to rise 125% to 2 billion KRW. Ji-yoon Jung of NH Investment & Securities said, "Recently, the renewal of S.I.Village and marketing targeting the MZ generation have increased sales on the online direct mall, improving profitability," adding, "Lifestyle brand Jaju recorded sales of 64.7 billion KRW, which is estimated to be at the breakeven point."