NH Investment & Securities on the 20th said Shinsegae's earnings improvement is set to gain traction on the back of strong department store and duty-free operations. It maintained a Buy rating and raised its target price 15.8% to 660,000 won from 570,000 won. Shinsegae closed the previous session at 506,000 won.
Researcher Joo Young-hoon at NH Investment & Securities said in a report on the 20th, "The most notable keywords in consumer stocks now are the asset effect and the increase in foreign visitors to Korea," adding, "Shinsegae is expected to see the strongest sales upside, anchored by its two pillars of department stores and duty-free shops."
The department store institutional sector is extending its growth as the consumption recovery and major store renewals take effect simultaneously, while duty-free is also rapidly improving its profit structure thanks to a rebound in downtown store profitability and the pullout from the DF2 zone business.
Earnings improvement at subsidiaries was also viewed positively. Shinsegae International and live shopping are showing a rebound on strong apparel sales.
Accordingly, Joo projected Shinsegae's full-year sales on a consolidation basis will rise 3.5% on-year to 7.1752 trillion won, with operating profit up 53.2% to 735.5 billion won, both marking record highs.
In addition, expectations for treasury share cancellation were reflected as a driver of higher corporate value. Shinsegae canceled 200,000 treasury shares in the first quarter of this year and still holds treasury shares equivalent to 7.2%. Joo changed the valuation method to be based on free float rather than shares outstanding, given the high likelihood of treasury share cancellation after the third amendment to the Commercial Act takes effect.