[Click eStock] "Hanssem Posts 3Q Loss, Must Watch Demand Recovery... Target Price Down 51%"

[Asia Economy Reporter Lee Myunghwan] Hanwha Investment & Securities announced on the 22nd that it maintains a buy rating on Hanssem but lowers the target price by 51.3%, from the previous 115,000 KRW to 56,000 KRW. This is due to the expectation that patience is needed until earnings recover.

Hanssem's consolidated sales for the third quarter of this year amounted to 477.3 billion KRW, down 10.9% compared to the same period last year. During the same period, operating loss was recorded at 13.6 billion KRW, turning to a deficit.

Hanwha Investment & Securities diagnosed that B2C (business-to-consumer) sales showed a double-digit decline for three consecutive quarters. Operating profit also returned to a loss after two quarters due to a continuous rise in cost of sales and increased selling and administrative expenses such as TV advertising and consulting fees. However, B2B (business-to-business) special sales recorded a growth rate close to 50%, showing some defensive trends, and considering the high level of order backlog, it is expected that favorable growth will continue until next year.

Hanwha Investment & Securities identified that demand recovery is the most important factor for Hanssem's earnings recovery, citing that major material prices have peaked and declined. They also pointed out that the increase in apartment move-in volumes from the second half of this year is positive for the recovery of B2B special sales and home furnishing sales. However, the rehouse segment, which accounts for the largest sales proportion, is in a poor situation as housing transaction volumes have hit an all-time low. Although real estate regulations are being eased for a soft landing of housing prices, it remains somewhat uncertain when the extremely rigid housing market will regain vitality.

Researcher Song Yurim of Hanwha Investment & Securities analyzed, "It seems that a waiting period is necessary until an environment conducive to earnings recovery is established," adding, "In the long term, it is necessary to observe the preparation process for achieving mid- to long-term goals, and in the short term, to monitor financial soundness improvement through the sale of idle assets, downward stabilization of raw material prices, cost reduction, and investment execution."