[Click eStock] "Shinsegae, Slow Recovery of Chinese Group Tours... Target Price Lowered to 250,000 Won"

Target Price Lowered by 16.7%
Investment Opinion Maintained as 'Buy'

On the 25th, Korea Investment & Securities announced that it is lowering the target price for Shinsegae from 300,000 KRW to 250,000 KRW, a 16.7% decrease. The investment rating remains 'Buy.'

Kim Myung-joo, a researcher at Korea Investment & Securities, stated, "It is disappointing that the recovery of group tours by Chinese tourists to Korea is slower than the market expected. However, considering the increased number of flights between Korea and China compared to the second half of last year, we expect the recovery of Chinese group tours to begin in earnest."

Korea Investment & Securities expects Shinsegae's consolidated sales for the fourth quarter of last year to be 1.7342 trillion KRW and operating profit to be 183.4 billion KRW, both in line with market expectations.

Researcher Kim said, "Although the duty-free sector is underperforming due to a slower-than-expected industry recovery, the department store segment recorded better-than-expected results, offsetting this. Thanks to favorable weather in the fourth quarter, same-store sales growth at department stores was better than anticipated, and operating profit is expected to reach 91.4 billion KRW."

Despite solid performance, Shinsegae's stock price has been sluggish, which is analyzed to be due to ongoing concerns about weakening consumption despite strong department store results and the slow improvement in the duty-free sector.

Researcher Kim noted, "Since household interest expenses have significantly increased compared to the pre-COVID-19 period, concerns about consumers' reduced spending capacity are not easily alleviated. This explains why department store companies, including Shinsegae, showed better-than-expected same-store sales growth in the fourth quarter of last year, yet their stock prices did not rebound this year."

Additionally, Kim stated, "Currently, concerns about the decline in Korean consumers' spending capacity are reflected in Shinsegae's stock price, but the potential recovery of Chinese group tours is not. Considering the valuation attractiveness and the strong profit resilience of the department store segment, Shinsegae's stock price has high downside rigidity."