[Click eStock] "Shinsegae International, Earnings Slowdown... Target Price Down"

[Asia Economy Reporter Son Sunhee] KB Securities lowered the target price for Shinsegae International from 40,000 KRW to 33,000 KRW on the 24th.

Shinsegae International's consolidated sales in the fourth quarter of last year increased by 3% year-on-year to 430.3 billion KRW, while operating profit decreased by 36% to 19.3 billion KRW. The operating profit significantly missed market expectations. It was analyzed that the profit declined due to expanded investment in marketing expenses. Additionally, the cosmetics division is estimated to have recorded an operating loss of 2.4 billion KRW. Sales related to China sharply declined due to lockdown measures, and one-time investment costs for nurturing new brands were incurred, worsening profitability.

Shinsegae International's consolidated sales this year are expected to grow by 4%, but operating profit is forecasted to decrease by 7%. This is a base effect following two years of strong performance. In particular, as domestic consumption slows down, the decline in profitability of the apparel division is expected to become more pronounced.

On the other hand, the cosmetics division is expected to show a gradual improvement in sales and profits, bottoming out from last year's performance. Although there are concerns about the slowdown in growth of the interior industry affecting the household goods division, it is expected to gradually expand its profit margin starting this year.

Park Shin-ae, a researcher at KB Securities, said, "While a slowdown in the performance momentum of the apparel division is inevitable, uncertainty in the cosmetics division remains high," adding, "Valuation pressure is limited, but there is also a lack of triggers for a meaningful stock price rebound."