IBK Securities noted on the 20th that despite ongoing short-term performance issues at Hyundai Home Shopping, there are significant expectations for shareholder returns. The firm maintained its investment recommendation of 'buy' and a target price of 76,000 won. The closing price for Hyundai Home Shopping on the previous trading day was 50,300 won.
Hyundai Home Shopping reported consolidated sales of 959.9 billion won and an operating profit of 48.1 billion won for the first quarter of this year (January to March). This represents a decline of 3.5% and 18.6%, respectively, compared to the same period last year. While the standalone operating profit increased by 23% compared to the same period last year, the poor performance of the consolidated subsidiaries dragged down the overall results.
The causes of the poor performance in the first quarter include: ▲ reduced sales of low-margin product categories in the home shopping division leading to decreased transaction volume; ▲ a drop in clothing sales due to deteriorating consumer sentiment; and ▲ a decrease in construction starts as a result of sluggish construction activity. Each of these factors impacted the sales of Hyundai Department Store, Handsome, and Hyundai L&C.
Nam Seong-hyun, a researcher at IBK Securities, explained, "It is highly likely that the poor performance of the consolidated subsidiaries will continue in the short term," adding that "the seasonal off-peak period will lead to a lower contribution to profits and that it will be difficult to expect a rapid recovery in the construction sector." Consolidated sales include the performance of Hyundai Home Shopping, Hyundai L&C, Handsome, and Hyundai Futurenet.
However, Nam's judgment is that the expectations for shareholder returns will be significant due to the recovery of profitability in the core business. He stated, "The shareholder return ratio of key affiliates in the Hyundai Department Store Group is expanding," and projected, "Considering the cash assets of Hyundai Home Shopping, the dividend amount is likely to increase again." He explained that with profit growth expected in the core business this year, an increase in dividends can be anticipated.