[Click eStock] "FILA Holdings, Performance Improvement After First Half of This Year"…Target Price ↓

[Asia Economy Reporter Lee Jung-yoon] Daishin Securities on the 6th downgraded the earnings forecast for Fila Holdings reflecting the decline in the exchange rate, lowering the target stock price from 47,000 KRW to 44,000 KRW. However, the buy rating was maintained.

Yoo Jung-hyun, a researcher at Daishin Securities, explained, "The significantly poor performance in 2022 due to the global economic recession, restructuring of low-price channels, and the impact of supply chain bottlenecks is expected to improve as we pass the first half of 2023," adding, "The domestic corporation is expected to see a relief in cost ratio burden due to the decline in exchange rates and raw material prices." He also stated, "If inventory adjustments in the sneaker industry in the U.S. conclude during the first half, there will likely be more flexibility in pricing policies."

The recent decline in the exchange rate also has negative aspects for Fila Holdings, which has a large proportion of overseas sales. However, since the effect of the cost ratio decline in the domestic corporation is currently greater, this year is analyzed to have a more positive impact overall. The demand slowdown in the golf sector is not as significant as feared, and this aspect has already been reflected in the value of subsidiaries, leading to an assessment that investing in Fila Holdings' current stock price carries little risk of loss.

Fila Holdings' sales in the fourth quarter of last year were expected to increase by 6% year-on-year to 912 billion KRW, and operating profit was expected to rise by 32% to 33.2 billion KRW.

Researcher Yoo said, "Due to the impact of restructuring low-price channels, sales declines continued in both domestic and U.S. corporations," adding, "In the U.S., discount sales surged due to inventory clearance by top-tier sports brands, leading to an increase in discount rates." He continued, "As a result, the situation of increased cost burden due to poor sales persisted," and added, "As already announced in the fourth quarter, one-time costs such as inventory disposal losses and retirement benefits occurred, which somewhat negatively affected the performance."

Additionally, the operating profit of subsidiary AccuSineNet in the fourth quarter was projected to remain at around 10 million USD. This is understood to be because the fourth quarter is traditionally the golf off-season, and related costs such as promotions occurred to clear last season's inventory ahead of new product launches this year.