Heungkuk Securities said on the 17th that Handsome's operating results are likely to improve on better consumer sentiment. It kept its "Buy" recommendation and raised the target price to 21,000 won from 19,000 won. Handsome closed at 15,830 won in the previous session.
Park Jong-ryeol, a researcher at Heungkuk Securities, said, "Household fashion consumption expenditure, which had been weak, is entering a gradual recovery phase," and noted, "Improvement in the asset effect and a recovery in consumer sentiment are working positively for the fashion industry."
Accordingly, Park forecast Handsome's fourth-quarter revenue at 445.9 billion won and operating profit at 25.9 billion won this year. Those would be up 2.3% and 23.7%, respectively, from a year earlier.
On profitability, Park projected the gross margin will rise on improved core indicators such as the full-price sell-through rate and overall sell-through rate, and that with lighter SG&A, the fourth-quarter operating margin will improve by 1.0 percentage point year over year to 5.8%.
Park saw next year's earnings uptrend strengthening gradually. He said, "Starting in the fourth quarter this year, the earnings momentum tied to improving fashion industry conditions will gradually strengthen," and added, "Along with a gradual recovery in scale, improvement in the gross margin and lower SG&A burden should sustain the trend of EBIT growth."
Park's forecast for Handsome's revenue next year is 1.53 trillion won, with operating profit of 65.1 billion won. Those represent increases of 3.7% and 28.2%, respectively, from a year earlier.
For mid- to long-term growth drivers, he cited strengthening Handsome's global brand competitiveness, expanding its overseas fashion portfolio, and extending into lifestyle areas including beauty. He also assessed as positive for shareholder value that from 2024 to 2027 the cash dividends pool has been raised and the company is considering additional buybacks and cancellations of treasury shares.
Park said, "As EBIT fell amid three years of deteriorating results since 2022, the stock price has also been in a prolonged downtrend," but added, "If future earnings improve in tandem with expanded shareholder return policies, it could set the stage for a rerating."