[Click eStock] "Hansome, Short-term Earnings Downgrade Inevitable Due to Consumer Slowdown... Target Price Down"

[Asia Economy Reporter Kwon Jaehee] Hana Securities downgraded its target price for Hansome from 40,000 KRW to 35,000 KRW on the 10th, maintaining a 'Buy' investment rating.

Hansome's Q4 sales increased by 2% year-on-year to 451.9 billion KRW, while operating profit decreased by 5% to 49.2 billion KRW. Growth in offline and online channels slowed significantly, with increases of 2% and a decline of 1%, respectively. The offline channel was heavily impacted by warm winter weather in November, which led to weak sales of winter clothing such as coats, a strength of Hansome. Due to the online channel's negative growth, which is relatively high-margin, and increased costs from launching new brands, the operating profit margin fell by 0.7 percentage points year-on-year to 10.9%.

January apparel retail sales declined by 0.7% year-on-year, and department stores, a major sales channel in January, recorded a 4% contraction. Although sales have been gradually recovering since February, Hansome's Q1 sales are expected to grow by 3%, with operating profit estimated at 53 billion KRW. The momentum for earnings is expected to remain weak for the time being due to consumption slowdown and costs related to new brand launches. However, five imported brands are scheduled to launch this year, and mid- to long-term growth visibility is expected to be secured through the full-scale opening of new brand stores such as cosmetics and select shops. For companies with strong brand power and abundant cash financially, this economic downturn could instead present an opportunity to expand market share. Although short-term earnings weakness is inevitable, there is a high possibility of achieving rapid growth during the economic recovery period through market share expansion and portfolio improvement during this time.

Seohyun Jeong, a researcher at Hana Securities, stated, "We are lowering the target price from 40,000 KRW to 35,000 KRW following the downward revision of earnings estimates," adding, "We maintain a conservative view until consumer sentiment recovers, but buying at the low point is valid from a mid- to long-term perspective."