[Click e-Stock] "Hyundai Department Store, Solid Performance and Stock Price ... Target Price Raised"

Target Price Raised from 84,000 Won to 98,000 Won

Yuanta Securities announced on June 30 that both the performance and stock price of Hyundai Department Store are showing a solid trend, and raised its target price from 84,000 won to 98,000 won. The investment opinion was maintained as 'Buy'.

Lee Seungeun, a researcher at Yuanta Securities, explained, "Since the beginning of the year, the stock price of the distribution sector has risen to a 12-month forward price-to-earnings ratio (PER) of 8 times. This is attributed to a revaluation of dividends and asset value, increased expectations for shareholder returns, and a strengthened preference for investment in defensive sectors amid external uncertainties." She added, "As the valuation re-rating trend is becoming more pronounced, we have uniformly applied a target PER of 9 times to the major department store companies under our coverage."

Hyundai Department Store's earnings for the second quarter of this year are expected to meet market expectations. Lee stated, "Hyundai Department Store's second-quarter revenue is projected to reach 1.13 trillion won, up 10% year-on-year, and operating profit is expected to increase by 94% to 82.9 billion won, which is in line with the consensus (the average forecast of securities firms) of 83.8 billion won." She continued, "The department store segment saw a slight increase in revenue compared to the same period last year, but profitability appears to have declined slightly due to the closure of the D-Cube branch, adjustment of inefficient stores, and a reduction in promotions, which lowered the contribution of some low-margin categories. However, as cost controls continued, the decline in profit was limited." She added, "The duty-free segment appears to have experienced a temporary decline in profitability due to a reduction in bulk sales following a drop in exchange rates and one-off costs related to the withdrawal from the Dongdaemun branch."

In the second half of the year, both the department store and duty-free segments are expected to see improved performance. Lee commented, "In the department store segment, sales, which slowed in the first half due to the closure of the D-Cube branch and sluggish appliance sales, are expected to improve in both growth rate and profitability as consumer sentiment recovers. For the duty-free segment, the potential resumption of bulk sales due to exchange rate stabilization and increased demand from Chinese tourists (Youke) as China routes recover will act as positive factors."

Lee also projected, "As the impact of one-off costs in the first half fades, a recovery to break-even levels is likely from the fourth quarter, and in the second half, profitability at airport duty-free stores will improve, leading to a full-fledged normalization of structural profit and loss."