[Click eStock] "Hanssem, Limitations in External Growth... Need for Shareholder Returns"

Investment Opinion Maintained as 'Neutral'

On the 15th, Korea Investment & Securities stated that Hanssem faces clear limitations in external growth and suggested a stock dividend as part of its shareholder return policy. The investment rating was maintained at 'Neutral.'

Researcher Kang Kyung-tae said, "There will be no external growth for the time being," adding, "While business-to-consumer (B2C) sales are recovering, business-to-business (B2B) sales have entered a declining trend."

He noted, "It will be difficult for consolidated sales to exceed 2 trillion won by 2025," and "Although operating profit will slightly increase through sales mix improvement and cost management, there are limitations."

He projected that consolidated sales for 2024 will decrease by 0.7% year-on-year to 1.9534 trillion won, while operating profit will increase by 1790.9% to 36.9 billion won. Housing transaction volume is expected to stagnate compared to 2023, and housing supply is estimated to decrease by 9.4%.

He explained, "Within the B2C sector, remodeling and furniture businesses are employing strategies to increase the average transaction price to offset weak demand," adding, "This involves reducing sales of mid-to-low priced package remodeling or decreasing sales of daily necessities sold through online and offline stores."

He pointed out, "The problem lies in B2B special sales. Special sales furniture revenue began to decline after peaking last year because there has been an absolute shortage of apartment construction starts, which are the basis for orders and sales."

Amid sluggish housing supply in the upstream industry, he also called for a stock dividend to enhance corporate value.

Researcher Kang emphasized, "The way to increase corporate value is to strengthen shareholder return policies," adding, "This could involve canceling treasury shares close to 30% of issued shares or conducting a stock dividend funded by retained earnings to increase the number of circulating shares."

He added, "Although all shareholders must bear dividend income tax since it is deemed a dividend, considering that bonus shares under the Commercial Act are not allocated to treasury shares, IMM PE's control will be further strengthened after the stock dividend, and the value of its stake will improve through stock price appreciation."