[Click eStock] "Shinsegae, Expanding Growth Each Quarter... Top Pick in Retail Industry"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Yuanta Securities maintained its 'Buy' rating and target price of 430,000 KRW for Shinsegae on the 16th.

Yuanta Securities forecasted that Shinsegae's consolidated sales for the third quarter of this year would reach 1.92 trillion KRW, and operating profit would be 195.7 billion KRW, representing increases of 15% and 91% respectively compared to the same period last year. This exceeds market consensus.

Based on this, growth is expected to continue next year as well. The rationale includes that if the appropriate valuation for department stores is a PER of 8 to 10 times, the decline in department store sales in 2023 would have to be between -10% and -20%. However, since 1997, such a level of decline has only occurred twice, during the IMF crisis and the COVID-19 pandemic. Additionally, under the consumer trend of 'the popularization of luxury,' department stores are experiencing structural growth, and with reopening, sales from foreign tourists, which accounted for about 5% of sales before COVID-19, are expected to recover. These factors support the expectation that the department store sector will continue to grow in 2023. The duty-free store sector may see momentum for recovery with the upcoming Guanggun Festival in November.

Researcher Lee Jin-hyeop of Yuanta Securities analyzed, "Despite Shinsegae's same-store sales growth rate expanding from 16% in Q1 to 19% in Q2 and 22% in Q3, the price-to-earnings ratio (PER) based on 2023 earnings is only about 5 times due to concerns over a peak-out in the department store sector." He added, "With reopening and the addition of foreign tourist sales, the profit improvement trend is expected to continue."

Researcher Lee also added, "We present our firm as the top pick in the retail sector."