[Click eStock] "Hansome, Market Contraction and SG&A Expense Increase... Target Price Down"

[Asia Economy Reporter Kwon Jaehee] Kiwoom Securities maintained a 'Buy' rating on Hansome on the 8th but lowered the target price from 47,000 KRW to 43,000 KRW.

Hansome's Q3 consolidated sales amounted to 341.4 billion KRW, and operating profit was 32.6 billion KRW, representing increases of 15% and 2% respectively compared to the same period last year. However, these figures fell short of market expectations. Although offline department store channel sales showed steady growth due to the reopening effect, marketing and related expenses increased because of the launch of new brands (Lanvin Blanc, Our Legacy) in Q3.

By channel, offline sales recorded 267.7 billion KRW, and online sales were 72.7 billion KRW, increasing by 18% and 5% respectively. Department store sales showed uniform growth across categories due to the reopening effect, with particularly significant increases centered on high-end men's and women's products. Online sales growth slowed somewhat as the company's own online channel entered maturity.

Hansome's Q4 consolidated sales are expected to reach 468.1 billion KRW, with operating profit of 53.5 billion KRW, representing increases of 5% and 3% respectively compared to the same period last year. Growth is expected to gradually slow due to the high base effect from last year's online and offline channels. The Q4 operating profit margin is forecasted at 11.4%. Since one new brand launch is scheduled for Q4 as well, related expenses are expected to cause a slight increase in selling and administrative expenses.

Researcher Cho Sojung of Kiwoom Securities stated, "From next year, the domestic business environment is expected to worsen due to a contraction in the domestic market, and investment costs for Hansome's mid- to long-term competitiveness are also expected to continue." She added, "However, even considering the derating reflecting concerns about the domestic market contraction, the stock price is undervalued, so we recommend buying."