[Click eStock] "F&F, Clear Earnings Recovery Trend... Target Price Up"

[Asia Economy Reporter Kwon Jae-hee] Shinhan Financial Investment maintained its 'Buy' rating on F&F on the 2nd and raised the target price to 250,000 KRW.

F&F's consolidated sales for the second quarter were 371.4 billion KRW, and operating profit was 95 billion KRW, up 22% and 26% respectively compared to the same period last year. This exceeded market consensus by 8%. Despite the early seasonal downturn caused by the prolonged rainy season starting in June, Discovery brand sales increased by 27% year-on-year, reaffirming its resilience. This growth was attributed more to existing store growth than new store openings, and profit contribution remained high due to reduced discount rates amid strong consumer demand. MLB sales, which saw a rapid increase in the proportion of sales to China, declined by 8% year-on-year to 171 billion KRW, performing better than market expectations.

In particular, overseas export sales grew significantly by 69% year-on-year to 118.8 billion KRW. Online sales in China during the first half of the year increased by 27% year-on-year, and the average monthly sales per store were about 110 million KRW, ranking among the top in the industry. The main factor behind the strong performance was reorder demand in June through local Chinese partners in response to the season.

With steady recovery in performance continuing in July, expectations for the third quarter results this year are likely to be maintained. As of the end of July, the number of stores in China was 707, and if the trend continues, securing 800 stores by the end of the year is expected to be achievable. Since the sales trend in June was maintained in July, there is no difficulty in keeping high expectations for third-quarter performance. Although the effect of new store openings will decrease toward the end of the year and next year, the operational efficiency of existing stores is quite high, and there is also potential for market expansion of the MLB Kids brand.

Hyunjin Park, a researcher at Shinhan Financial Investment, analyzed, "The acquisition of the Sergio Tacchini brand, which includes business targeting Europe and the United States, appears to have positively influenced F&F's valuation level," adding, "In the long term, the synergy expected from TaylorMade's business and financial perspectives is also a strong attraction point, so we maintain our top pick opinion."