[Click eStock] "Shinsegae, Lack of Upward Momentum for the Time Being... Target Price Down"

Target Price Revised Downward by 14% Compared to Previous Level

Daishin Securities on the 11th downgraded the target price for Shinsegae from 220,000 KRW to 190,000 KRW, anticipating a lack of upward momentum in the near term. The investment rating was maintained at 'Buy.'

Yoo Jeong-hyun, a researcher at Daishin Securities, explained, "The target price downgrade reflects lowered 2025 earnings due to poor performance in the duty-free sector. The expected further deterioration in the duty-free segment's profitability negatively impacts corporate value, and since improvement in duty-free profits depends on the recovery of global travelers' shopping, the stock price is expected to lack upward momentum for the time being." He added, "However, since a corporate value enhancement plan is scheduled to be announced within the year, the downside risk to the stock price is limited."

Shinsegae's third-quarter performance this year was weak due to increased duty-free store rental costs despite strong results from department stores. On a consolidated basis for Q3, total sales rose 4% year-on-year to 2.7089 trillion KRW, while operating profit fell 29% to 93 billion KRW. Researcher Yoo stated, "The department store segment saw total sales grow by 2%, but operating profit declined by 5% due to sluggish high-margin fashion sales and increased expenses such as depreciation, showing relatively solid performance. Shinsegae DF (duty-free) recorded daily sales at the downtown store of about 8.5 billion KRW, similar to Q2 levels, but operating profit turned from 8.6 billion KRW in Q2 to an operating loss of 16.2 billion KRW in Q3." The turnaround to a loss in the duty-free segment was due to increased rental costs following the first grand opening of the Incheon Airport duty-free store's first phase in September, which expanded the operating area, while sales have not yet significantly increased, causing only cost factors such as depreciation to rise.

Shinsegae International also experienced weak performance due to sluggish fashion sales, similar to the department store segment, but other affiliates performed well. Researcher Yoo analyzed, "Central City's stable rental income structure led to a 4% increase in operating profit in Q3, and most other affiliates, including Shinsegae Casa and live shopping, continued their earnings growth trend despite the challenging business environment."