NH Investment & Securities on the 12th said Hyundai Department Store's affiliate ZINUS posted disappointing earnings, but its core businesses of department stores and duty-free shops are on track. It maintained a Buy rating and raised the target price by 18% to 130,000 won. Hyundai Department Store's previous closing price was 107,100 won.
Hyundai Department Store in the fourth quarter last year reported consolidated net revenue of 1.0417 trillion won and operating profit of 106.2 billion won. That fell short of the consensus (market average estimate). The affiliate ZINUS posted an operating loss of 23.2 billion won, larger than previously expected, which was cited as the reason. The department store and duty-free shop institutional sectors delivered results in line with expectations.
NH Investment & Securities explained that the basis for the target price hike was a higher multiple reflecting strong results in the department store institutional sector.
Researcher Ju Young-hoon at NH Investment & Securities said, "We slightly lowered our annual estimates due to the prolonged weakness in affiliate ZINUS's results, but this is not a major concern given ZINUS's small share of Hyundai Department Store's corporate value."
Earnings improvement led by department stores is expected to continue this year. For duty-free shops, it was viewed positively that the profit-making trend continued under the efficiency strategy.
Researcher Ju said, "Whether affiliate ZINUS achieves a turnaround will be the only variable for consolidation-side results."
Hyundai Department Store announced an expansion of shareholder returns along with its earnings release. It plans to cancel all 4.7% of treasury shares held on Apr. 28 and buy 21 billion won in new treasury shares for cancellation within the year.
Researcher Ju analyzed, "The highest level of shareholder-return policy in the industry is a factor that increases Hyundai Department Store's investment appeal."