[Click eStock] "Shinsegae Inter, Q4 Weakness... Limited Top-Line Growth"

Meritz Securities Report

[Asia Economy Reporter Kwangho Lee] Meritz Securities analyzed that Shinsegae International's fourth-quarter performance last year is expected to fall short of market expectations, suggesting that expectations should be lowered. The investment opinion is Buy, with a target price of 31,000 KRW.

Hanuri, a researcher at Meritz Securities, said, "It is difficult to be free from the slowdown in domestic consumption, and the growth in scale based on the apparel business will be limited due to the decline in real purchasing power."

Researcher Han added, "SIV is also expected to reach the break-even point (BEP) with total sales of 250 billion KRW through product expansion, and we recommend additional buying responses if the decline widens over the long term."

Meritz Securities forecast that Shinsegae International's fourth-quarter sales last year will increase by 1.3% year-on-year to 423.6 billion KRW, operating profit will decrease by 19.2% to 24.3 billion KRW, and net profit will drop by 46.2% to 16 billion KRW. The apparel division is estimated to have sales of 267 billion KRW, up 2.1%, and operating profit of 26.8 billion KRW, up 9.4%.

Researcher Han said, "Despite the market downturn, imported brands are expected to perform well," and "For the in-house business, we reflected the removal of wholesale and a decrease in sales volume."

For cosmetics, sales are expected to increase by 4.2% to 86.5 billion KRW, while operating profit is forecasted to decrease by 86.3% to 1.1 billion KRW. The household goods division is expected to see sales increase by 2.3% to 70 billion KRW, but operating profit is estimated to turn to a loss of 2.1 billion KRW.

Regarding the cosmetics division, he said, "The expansion of new brand investment estimated at 10 billion KRW and inventory adjustments of Vidi Vici and Swiss Perfection will overshadow the strength of imports." About the household goods division, he diagnosed, "There was a significant burden from licensing fees on top of store opening costs."