[Click eStock] "Shinsegae International, Record Quarterly Performance... Results Expected Next Year as Well"

[Asia Economy Reporter Lee Jung-yoon] Meritz Securities on the 11th issued a buy rating and a target price of 45,000 KRW for Shinsegae International, stating that the company will show solid performance in 2023 with the resumption of growth in the cosmetics sector and a turnaround to profitability in the household goods sector.

Shinsegae International's sales in the second quarter of this year recorded 383.9 billion KRW, up 12.7% year-on-year, operating profit increased by 46.1% to 38.7 billion KRW, and net profit rose 74% to 33.2 billion KRW, marking the highest quarterly performance. The operating profit exceeded the consensus estimate by 14.5%.

The apparel division posted sales of 219.5 billion KRW, up 12.6% year-on-year, and operating profit of 28.7 billion KRW, a 67% increase. Strong sales were accompanied by an increase in normal rates, and the operating leverage effect was prominent. Profitability also improved due to the withdrawal of underperforming brands.

The cosmetics division recorded sales and operating profit of 94.6 billion KRW and 8.0 billion KRW, up 13.1% and down 26.1%, respectively. Profitability declined due to increased investment costs related to new brands, but strong imports and a rebound of Vidi Vici were confirmed. The household goods division saw sales increase by 12.8% to 70.1 billion KRW and operating profit surge 171.2% to 2.3 billion KRW. The increase in premium product ratio and changes in lease contracts contributed to the significant profit growth.

Hanuri, a researcher at Meritz Securities, explained, "The company is actively securing new growth engines such as the full-scale launch of Swiss Perfection's B2C (business-to-consumer) business, acquisition of new distribution rights and mergers and acquisitions, and strengthening its own online mall."