Hana Securities noted on the 25th that the main reason for Hansei Industry's poor performance last year was the sluggish business environment. The investment recommendation remains "Buy", and the target price has been lowered by 17% from the previous estimate to 17,000 won. Hansei Industry's closing price on the previous day was 12,760 won.
Hansei Industry's consolidated sales for the fourth quarter of last year were 404.1 billion won, a 14% increase compared to the same period last year. Operating profit decreased by 44% to 15.4 billion won compared to the previous year.
Research Institute analyst Seo Hyun-jeong analyzed, "It appears that margins have been impaired due to limited order acquisition and pressure to lower prices from high-margin brand companies." She added, "As a result, the cost rate has significantly increased, and the operating profit margin has declined by 3.9 percentage points to 3.8% compared to the previous year."
Additionally, the reduction of Hansei Industry's Haitian subsidiary production plant was analyzed as a factor contributing to the burden of one-time costs related to equipment assets and provisions for retirement benefits.
The main reason for Hansei Industry's poor performance in the fourth quarter of last year was ultimately due to the sluggish business environment. Research Institute analyst Seo said, "Due to uncertainty in U.S. consumption, buyers' expectations for inventory orders have diminished, leading to a slowdown in orders from original equipment manufacturers (OEM) and downward pressure on average selling prices (ASP)," and added, "This represents phenomena commonly seen in a business downturn."
Hansei Industry maintained an operating profit margin of around 9% until the first half of last year, but this began to rise in the second half. Although there were issues with one-time expenses, the lack of increased orders caused a decline in production efficiency, expanding low-priced contracts and narrowing the price-cost spread.
Research Institute analyst Seo noted, "Currently, the business environment is selectively increasing based on specific buyers or categories, but there is no overall increase in orders," and added, "The U.S. clothing sales growth rate should rise meaningfully in the second half of this year, leading to a gradual rebound in the business environment."
Seo forecasted that Hansei Industry's sales for this year would reach 1.8754 trillion won, a 4% increase from the same period last year, while operating profit is estimated to rise by 10% to 155.2 billion won. Seo stated, "We assume that both sales and profitability will gradually recover as orders for the year-end consumer season and next year's orders begin to come in during the second half."