[Click eStock] "Shinsegae International, Good Performance but Limited Stock Price Growth"

Hana Securities Report
Target Price Down 4% from Previous Level

[Asia Economy Reporter Minji Lee] Hana Securities maintained a buy rating on Shinsegae International on the 12th and set a target price of 44,000 KRW, down 4% from the previous target. Although stable earnings are expected in the third quarter, it is analyzed that there are limitations to the stock price momentum due to unstable consumer sentiment.

In the second quarter, Shinsegae International recorded sales and operating profit of 383.9 billion KRW and 38.7 billion KRW, respectively, up 13% and 46% compared to the same period last year. The operating profit exceeded the market expectation of 34 billion KRW.

The fashion division's sales grew by 12%, driving the improvement in performance. Overseas fashion sales increased by 15%, and domestic fashion sales grew by 12%, supported by strong performance of women's wear brands such as BOB and JIGGUT. The fashion division's operating profit increased by 72%, raising its contribution to profits.

The cosmetics division's sales grew by 12%, but operating profit decreased by 33% due to marketing expenses invested to foster in-house cosmetics. The daily necessities division's sales grew by 13%, and operating profit recorded 2 billion KRW.

Researcher Hyunjeong Seo of Hana Securities said, "With the full-scale reopening effect, the company continued a solid transition to actual performance through the second quarter," adding, "Fashion sales grew 12% year-on-year, and the sales proportion on a consolidated basis is estimated to have expanded to 57%."

The high performance momentum is expected to continue into the third quarter. Due to steady clothing consumption demand and base effects, the fashion division has maintained double-digit growth in July and August. In terms of profitability, domestic fashion and daily necessities divisions have entered a profit-increasing phase, enhancing earnings visibility. The expected operating profit for the third quarter is 26 billion KRW, an 84% increase compared to the same period last year.

However, there are limitations to the stock price momentum. Researcher Seo analyzed, "Although the performance improvement trend will continue with a solid clothing consumption base until the end of this year, concerns remain due to unstable factors such as consumer sentiment and the resumption of global travel."