Shinhan Investment Corp. analyzed that Hwaseung Enterprise, a shoe original equipment manufacturer (OEM), is the only growth stock in the textile and apparel industry. As a result, it maintained its investment opinion of "buy," but raised the target price from 12,000 won to 16,000 won, an increase of approximately 33.3%. In the previous transaction, Hwaseung Enterprise closed at 11,200 won.
According to Shinhan Investment Corp., Hwaseung Enterprise's 2024 fourth-quarter revenue is projected to increase by 50% year-on-year to 486.5 billion won, with operating profit showing a significant increase of 392% to 394 billion won. This figure exceeds Shinhan Investment Corp.'s estimate by more than 30%. The revenue contribution from production volume is estimated at 70%, while the order unit price is estimated at 30%.
Park Hyun-jin, a researcher at Shinhan Investment Corp., said, "The order for major client Adidas Originals' sessions has been steadily increasing. Amid increases in orders for the Adizero and Supernova series, the production capacity is continuously improving due to the expansion of orders for original steady seller products." He also noted that "seasonal demand for special new products during last year's second half, such as the Olympics and Euro, is expected to have been recognized in sales, and it appears to be proceeding as anticipated."
Park further stated, "Concerns about the poor performance of HSPL Corp., which produced Boostform, arose as production of existing mass-produced products like Yeezy Boost decreased, but there were no expense issues. Additionally, the adoption of Boostform by Adidas' mid-priced line and other brands appears to have led to a slight recovery in related profitability."
Hwaseung Enterprise's revenue for the first quarter of this year is projected to increase by 32% year-on-year to 456.4 billion won, with operating profit anticipated to soar by 328% to 22.8 billion won. Park noted that "Last year, around the second half, we expected this year's operating profit to be 100 billion won, but thanks to this strong performance, an upward adjustment in guidance (corporate outlook) is expected," and he raised this year's profit estimate by more than 10%.