[Click eStock] "Hyundai Department Store Strengthens Shareholder Return Plan... Target Price Lowered"

NH Investment & Securities stated on the 8th that Hyundai Department Store announced a shareholder return plan including treasury stock cancellation and dividend expansion, and forecasted that the valuation discount (stock price level relative to corporate value) will ease.

However, reflecting the slow profitability improvement in the department store and duty-free shop sectors, the target stock price was lowered by 12% to 60,000 KRW from the previous level. The buy rating was maintained.

On the day, Younghoon Joo, a researcher at NH Investment & Securities, said, "The target stock price was calculated by applying a price-earnings ratio (PER) of 7.0 times to the controlling shareholder's net income," adding, "Considering Hyundai Department Store's absolute undervaluation area and the expanded shareholder return plan, there is sufficient potential for corporate value appreciation."

Hyundai Department Store has been evaluated as lacking in terms of shareholder returns so far, but plans to cancel half of its treasury shares (6.6%) held. In addition, it plans to introduce semi-annual dividends and expand the total dividend payment amount to around 50 billion KRW by 2027.

The consolidated performance for the third quarter met the market average forecast. During this period, sales amounted to 1.0368 trillion KRW, a 3% increase compared to the same period last year, while operating profit was 64.6 billion KRW, a 13% decrease compared to the previous year.

The department store sector saw sales decrease by 2% compared to the same period last year due to sluggish consumer sentiment and the impact of renovation work at the Busan branch, but winter clothing sales have improved since this month, raising expectations for a rebound in the fourth quarter. The duty-free shop sector recorded an operating loss of 8 billion KRW in the third quarter, turning to a deficit. Given the continued difficulties in the duty-free market, the focus is expected to be on profitability improvement rather than external growth.

The fact that the subsidiary Zinus succeeded in a performance rebound is positive. Researcher Joo added, "Since Zinus has presented an operating profit forecast of over 10 billion KRW for the fourth quarter as well, its contribution to consolidated performance is expected to increase."