[Click eStock] "Hyundai Department Store, Expecting Jinus Performance Improvement from Second Half"

On the 5th, IBK Investment & Securities maintained its buy rating and target price of 75,000 KRW for Hyundai Department Store, stating, "Although the continued decline in performance following the consolidation of its subsidiary, mattress and furniture company Jinus, has been a burden, consolidated earnings are expected to improve from the second half of the year due to Jinus's performance improvement."

On the same day, Nam Seong-hyun, a researcher at IBK Investment & Securities, said, "Hyundai Department Store's second-quarter performance is expected to be sluggish. We believe profit growth will not be easy in the second quarter following the first quarter," adding, "Second-quarter consolidated sales are projected to be 968.5 billion KRW, down 0.2% year-on-year, and operating profit is expected to be 37.5 billion KRW, down 32.5%, falling short of the market expectation of 53 billion KRW by about 29.3%."

Regarding the reasons for the negative earnings forecast, he explained, "The growth rate of existing department store stores is only about 1.5~2%, making it difficult to absorb increased costs, and expenses such as water, utilities, labor costs, and depreciation appear to be rising," adding, "Despite an increase in foreign visitors during the winter season, duty-free store sales growth is weaker than expected. The impact of Jinus's poor consolidated performance will also continue."

Researcher Nam said, "Despite growth in the department store channel in the second quarter, profit growth is expected to be difficult due to depreciation expenses from last year's renewed stores and a higher cost structure," and added, "Additionally, the burden from increased rent at The Hyundai (about 4 billion KRW) is likely to have an effect."

Jinus is expected to show clear improvement from the second half of the year. Researcher Nam stated, "The burden on Jinus's performance is likely to continue until the second quarter. However, this burden is expected to ease in the second half, and Hyundai Department Store's fundamentals are expected to improve." Regarding the reasons for expecting Jinus's improvement, he said, "The 0% anti-dumping tariff reclassification has increased price competitiveness in the market. Growth through diversification of supply chain channels and orders due to depletion of inventory in the front channels are anticipated."