[Click eStock] "Hyundai Department Store Expected to Turn Duty-Free Profitable in Second Half... Target Price Raised"

Target Price Raised by 8% from Previous Level

On October 13, Shinhan Investment & Securities raised its target price for Hyundai Department Store from 93,000 won to 100,000 won, anticipating that the duty-free segment will turn profitable in the second half of the year. The investment opinion remains 'Buy.'

Shinhan Investment & Securities researcher Cho Sanghoon stated, "We have raised our target price by 8% from the previous level, reflecting the rise in global peer group valuations. We expect purchasing power to improve, supported by domestic demand stimulus measures following the launch of the new administration, and anticipate a turnaround to profitability in the duty-free segment in the second half due to the closure of the Dongdaemun branch. The visa waiver policy for Chinese group tourists, implemented from the end of September, is also expected to positively impact the share price, so we maintain our top-pick recommendation within the sector."

Hyundai Department Store's third-quarter performance this year is projected to meet market expectations. Researcher Cho commented, "For the third quarter, Hyundai Department Store is expected to post sales of 982.7 billion won, down 5.2% year-on-year, and operating profit of 79.4 billion won, up 23%, in line with the consensus (the average of securities firms' forecasts). Unlike the first half, while Zinus underperformed, the rebound in department store sales-the company's core business-has positively contributed to profits."

The department store segment is expected to achieve a 5% total sales growth rate in the third quarter, marking a successful rebound. Cho explained, "While high-margin fashion categories saw a slight increase, luxury brands drove top-line growth. Structural cost-efficiency efforts and the leverage effect from higher sales are expected to result in operating profit growth for the first time in five quarters." The duty-free segment is anticipated to turn profitable due to fixed cost savings following the closure of the Dongdaemun branch in August, despite sluggish sales. Zinus is expected to see both sales and operating profit decline, due to a high base in the previous year, increased Indonesia-U.S. tariff rates leading to higher cost ratios, and increased advertising and promotional expenses. However, Cho noted, "Price negotiations with Amazon have concluded, so we expect a recovery starting in the fourth quarter."

Additional shareholder return policies are also positive. Cho added, "Valuation appeal and enhanced shareholder return policies are strong downside support factors. The additional shareholder return measures, such as using half of the cash inflow (40 billion won) from the sale of the remaining 7.34% stake in Hyundai Home Shopping to repurchase treasury shares, are also positive."