[Click e-Stock] "Shinsegae's Department Store Boom to Continue Next Year... Target Price Raised"

"Express Bus Terminal Redevelopment Also a Re-Rating Factor"

On December 29, Shinhan Investment Corp. projected that the rebound in department store purchasing power, which began in the third quarter of this year, will continue into next year, supported by the government's expansionary fiscal policy and measures to boost domestic demand.

Shinhan Investment Corp. analysts Cho Sanghoon and Kim Taehun stated this in a report released on the same day, maintaining their "Buy" rating on Shinsegae, raising the target price by 29% from the previous level to 310,000 won, and designating it as their top pick in the sector.

They highlighted the recent sharp growth in the department store segment. Total department store sales increased by 10% in October and 7.3% in November, marking two consecutive months of high growth. They analyzed that December is also maintaining the robust trend seen in November, helped by the flagship store's renovation effects. They stated, "All segments, including high-margin fashion product categories, are performing well, with luxury goods driving top-line growth," and predicted, "The strong performance of department stores will continue next year, thanks to an overall recovery in consumer sentiment and the wealth effect from rising asset markets."

The rising proportion of foreign customer sales is also a positive factor. With the expansion of inbound (foreigners traveling to Korea) momentum, the proportion of foreign sales is expected to rise from 4.4% in the first half of this year to 5.1% in the second half, and up to 6% in 2026. In particular, China's Hanilryeong (restrictions on Japanese content inflow and similar measures) emerging as an issue since November was cited as an opportunity. The analysts noted, "Since 2022, Japanese department store companies' sales have increased by an average of 8% annually, and from June 2023 to July 2024, when the number of Chinese visitors to Japan surged, stock prices rose by an average of 94%." They analyzed, "With the increase in the proportion of foreign sales, the growth rate of same-store sales at department stores will contribute to higher growth starting next year."

The duty-free business division is also expected to see significant profit leverage effects. The visa waiver policy for Chinese group tourists is expected to further boost sales, while the decision to return the Incheon Airport duty-free DF2 concession is anticipated to reduce losses at the airport location.

The analysts commented, "Although the recent share price rally has pushed the 2026 forecast price-to-earnings ratio (26F PER) up to 9.4 times, raising some concerns about valuation pressure, department store sales growth has exceeded 10% in the fourth quarter, and enhanced shareholder return policies are limiting those concerns." They added, "The recent spotlight on asset value due to the redevelopment issue of the Express Bus Terminal site is also a factor for corporate value re-rating."