NH Investment & Securities evaluated on the 25th that Shinsegae's department store sector continues to show stable growth, and the visibility for improvement in the duty-free sector's performance in the second half has increased. The investment opinion remains 'Buy,' and the target price has been raised by 7% to 220,000 won. Shinsegae's closing price on the previous transaction day was 185,000 won.
Shinsegae's consolidated revenue and operating profit for the second quarter recorded 1.67 trillion won and 90 billion won, respectively. Revenue increased by 4% compared to the same period last year, while operating profit decreased by 23%.
Researcher Joo Young-hoon of NH Investment & Securities explained, "The main reason for the decline in consolidated performance is the burden of the duty-free sector's performance base, but starting from the third quarter, this impact is expected to ease, enabling a potential shift to an upward trend in profits."
He projected that the total revenue of the department store sector (based on the current year) would increase by 2% compared to the previous year. Researcher Joo stated, "So far, the recovery of sales in the fashion category has been sluggish, but there continues to be growth centered around luxury goods," and added that "however, due to the increase in depreciation expenses, operating profit is expected to decrease somewhat."
Researcher Joo explained, "Amidst stable performance in department store sales, expectations for improvement in duty-free performance are being reflected."
In particular, the intensity of competition has eased as competitors' downtown duty-free businesses have shrunk, and discussions are ongoing regarding the implementation of a temporary visa-free entry for Chinese group tourists in the third quarter, as well as the application for adjustments to the rental fees at Incheon Airport, which is a major cause of operating losses at duty-free shops.
Researcher Joo projected, "Since last year's second half performance base is also low, the improvement in consolidated performance in the second half will be led by the duty-free sector."