[Click eStock] Hanssem, Profit Improved but Outlook Uncertain... Target Price Down 10%

Improved Q3 Profits Due to Cost Reduction
Additional Cost Savings Difficult to Expect
Lack of Performance Improvement Momentum... Leverage Effect Is Key

Hanssem significantly improved its profits through cost reduction effects despite a decline in sales in the third quarter, but questions have been raised about whether this trend can continue into 2025. On the 22nd, Shin Young Securities downgraded Hanssem's investment opinion from 'Buy' to 'Neutral' and also adjusted the target price down by 10%, from 60,000 KRW to 54,000 KRW. Hanssem's closing price on the previous trading day was 51,400 KRW.

According to Shin Young Securities, Hanssem's third-quarter sales amounted to 454.1 billion KRW, a 5.6% decrease compared to the same period last year, while operating profit increased by 48.2% to 7.3 billion KRW. Net profit reached 124.7 billion KRW due to a one-time gain from the sale of its office building. The cost of goods sold ratio was 75.7%, and the operating profit margin was 1.6%, improving by 1.2 percentage points and 0.6 percentage points respectively compared to the same period last year. By item, reductions in costs related to inventory changes, commission payments, and promotional expenses significantly contributed to the improvement in the cost structure.

However, it is uncertain whether the cost reduction effects will continue into 2025. Commission payments account for the largest portion of expenses in the home shopping channel, but since there are no plans for further channel reductions, the cost-saving effect is expected to be limited. Promotional expenses have already reached the lowest level at about 80% of the five-year average, leaving little room for further cuts.

Additionally, about 10 billion KRW in annual rent expenses newly added due to the office building sale means that there is insufficient room for additional cost reductions, according to Shin Young Securities' analysis. As a result, it is suggested that in 2025, aside from the leverage effect from sales growth, there may be a lack of momentum for performance improvement.

Researcher Park Sera of Shin Young Securities stated, "With limited cost reduction effects, worsening external conditions, and uncertain growth strategies are diminishing investment attractiveness," and added, "The leverage effect from sales growth will be the key factor for performance improvement."