[Special Stock] Hwasung Enter, Turnaround 'Begins' After 3 Years of Slump

Hwasung Enterprise is showing strong performance. It is interpreted that the analysis by securities firms, which suggests that the turnaround in earnings will begin in earnest from this year after a period of sluggishness, has had an impact.

As of 1:45 PM on the 7th, Hwasung Enterprise was traded at 8,670 KRW, up 430 KRW (5.22%) compared to the previous trading day.

Yoo Jeong-hyun, a researcher at Daishin Securities, stated, "Due to Adidas's inventory reduction plan in 2023, Adidas's sneaker production volume decreased by 27% compared to the previous year, recording a production volume even lower than during COVID-19." He added, "Because of this, Hwasung Enterprise inevitably experienced a decline in performance last year due to reduced operating rates, but this year, production is increasing again thanks to improvements in the sneaker industry and Adidas's lowered inventory levels."

Daishin Securities forecasted Hwasung Enterprise's third-quarter sales this year to be 391.8 billion KRW and operating profit to be 20.4 billion KRW. Compared to the same period last year, sales are expected to increase by 50%, and operating profit is expected to turn positive. He explained, "With Adidas increasing production plans due to higher sales volume, the company's factory operations have stabilized at normal levels. Although the third quarter is traditionally an off-season, production volume is continuously increasing quarterly this year, so third-quarter operating profit is estimated to be higher than that of the second quarter."

He added, "In the fourth quarter, production of Adidas Originals products (Samba, Gazelle, Campus, etc.) is expected to increase significantly. These series products have order unit prices around $18 to $20, which will increase their proportion and contribute to the recovery of overall ASP and margins."

Researcher Yoo emphasized, "Currently, the client is increasing production of high-priced products such as Boost, but it seems they are increasing sales of more popular Originals products. Accordingly, it is estimated that the company's production product mix will temporarily rise with a focus on the proportion of Originals products."