[Click eStock] "F&F, New Record in China Sales... Good Prospects for Next Year"

Meritz Securities Report

[Asia Economy Reporter Minji Lee] Meritz Securities on the 2nd issued a buy rating and a target price of 250,000 KRW for F&F, which posted strong third-quarter earnings.

F&F recorded sales of 441.7 billion KRW and operating profit of 138.4 billion KRW in the third quarter, up 34.3% and 44.6% respectively compared to the same period last year. Net profit increased by 54.8% to 110.1 billion KRW. The positive factors included a new record in the China segment, strong domestic demand, and dividend income from Taylor Made.

In the domestic market, MLB's brand power continued to improve, but the duty-free segment declined by 25.4% due to volume adjustments. Discovery grew by 28.1%, maintaining a high growth trend through strong outdoor demand and product expansion. In the overseas segment, sales in China increased by more than 65% to 202 billion KRW, achieving the highest performance ever. Store openings increased by 88% compared to the previous quarter, accompanied by strong same-store sales, resulting in high-quality growth. Sales at dealerships, directly operated stores, and online increased by 65.8%, 140.8%, and 29.6%, respectively. The Hong Kong segment recorded 11.4 billion KRW, growing 27.3%.

China's sales are expected to be at the highest level compared to other companies. F&F's sales in China are projected to be 657 billion KRW this year and 1.0126 trillion KRW next year, while LG Household & Health Care is expected to record 782.1 billion KRW and 856 billion KRW, and Amorepacific 793.8 billion KRW and 781.6 billion KRW, respectively. However, based on next year's price-to-earnings ratio (PER), F&F's 10x is lower than LG Household & Health Care's 15x and Amorepacific's 22x.

Hanuri, a researcher at Meritz Securities, explained, “We believe that not only relative growth but also absolute scale will reach the highest level among domestic consumer goods companies,” adding, “In the fourth quarter, MLB is expected to expand its base by entering new markets such as Singapore, Indonesia, and Malaysia.”