[Click eStock] "F&F, Rising Earnings Expectations Amid December Cold Wave and China Economic Recovery"

[Asia Economy Reporter Lee Jung-yoon] Daishin Securities maintained a buy rating and a target price of 200,000 KRW for F&F on the 16th, stating that expectations for performance improvement in the first half of next year remain valid.

Last month, concerns arose about the fourth-quarter performance due to the warm winter weather in Korea and sporadic lockdowns in China. As a result, the stock price fell more sharply compared to the KOSPI over the past month. However, since the cold wave, which accounts for about 50% of the fourth-quarter performance, began this month, it is highly likely that domestic performance concerns will be largely resolved. Additionally, considering the easing of China's quarantine guidelines and the base effect from lockdown damages between March and May this year, expectations for performance improvement in the first half of next year remain valid.

F&F's fourth-quarter sales are expected to increase by 13% year-on-year to 635.6 billion KRW, and operating profit is projected to rise by 12% to 205.6 billion KRW.

In the case of Discovery, growth slowed somewhat last month due to warmer-than-average weather. However, with the onset of the cold wave this month, the fourth-quarter growth rate is estimated at 20%, lower than the 30% year-on-year growth rate in the third quarter.

MLB, similar to Discovery, is estimated to have increased by 22% year-on-year in the domestic general channel last month due to weather effects. The duty-free channel focuses on the Chinese corporation strategy but is understood to be sluggish due to the slow recovery of the duty-free market. For the Chinese corporation, the fourth-quarter sales growth rate is expected to increase by 26% year-on-year due to sporadic lockdowns in Beijing last month and early shipment of winter outerwear in the third quarter.

Yoo Jung-hyun, a researcher at Daishin Securities, explained, "Due to favorable domestic sales growth in the fourth quarter and an increase in the proportion of Chinese sales without distribution fees, the company's overall operating profit margin is expected to improve year-on-year, reaching 32.4%."