[Click eStock] "Fila Holdings, Possible Return to Profit Next Year... Investment Opinion and Target Price Up"

Investment Opinion Upgraded from 'Market Perform' to 'Buy'
Target Price Raised by 30% Compared to Previous

Daishin Securities raised its investment opinion on Fila Holdings from 'market performance' to 'buy' and increased the target price from 40,000 KRW to 52,000 KRW on the 16th, seeing a high possibility of turning profitable from next year.

Yoo Jeong-hyun, a researcher at Daishin Securities, explained, "We upgraded the investment opinion because we judged that the large-scale losses caused by brand damage in Korea and the US will end this year and profitability is likely to return from next year. To reflect the value as a global brand in the corporate value, we raised the target price-to-earnings ratio (PER) from 10 times to 12 times, increasing the target price by 30%."

Fila Holdings recorded sales of 1.1753 trillion KRW in the second quarter of this year, a 3% increase compared to the same period last year, and operating profit of 140.1 billion KRW, up 52%. Although Korea and the US underperformed, commissions from China and the performance of Acushnet were favorable. Researcher Yoo analyzed, "Korea showed weakness with a 3% decrease in pure domestic sales and an operating loss of 600 million KRW, but new products such as 'Interrun' and 'Echape' showed strong sales, and with significant channel restructuring, the gross profit margin (GMP) improved, greatly reducing the deficit. The US subsidiary saw a 12% decrease in sales and an operating loss of 29.2 billion KRW, with losses expanding compared to the first quarter."

Fila Holdings is showing a steady stock price trend thanks to efforts to enhance shareholder value such as share buybacks. Researcher Yoo said, "The key to the recent stock price trend of Fila Holdings is the long-term investment appeal from stable cash structure-driven share buybacks and dividends, despite prolonged poor performance. Of the 50 billion KRW share buyback plan for this year, 19 billion KRW has been completed, and the stock price is very stable not only due to stable supply and demand factors but also because of the company's intention to raise the dividend payout ratio to 50% by 2026." He added, "If profitability turns positive in either Korea or the US, the stock price is likely to rise sharply."