IBK Securities on the 17th projected that Hyundai Department Store's second-quarter consolidated net sales will top 1 trillion won this year. It maintained a Buy rating and raised the target price to 250,000 won. Hyundai Department Store's previous closing price was 198,400 won.
IBK Securities expected Hyundai Department Store's second-quarter results to far exceed its earlier estimates. On a consolidation basis, second-quarter net sales are forecast to rise 10.6% on-year to 1.1953 trillion won, with operating profit up 29% to 112.1 billion won.
Nam Seong-hyeon, an analyst at IBK Securities, said, "We initially expected operating profit to decline due to weak results at ZINUS and a one-off base effect, but we believe profit growth will be possible thanks to strength in the department store and duty-free businesses."
In particular, it said second-quarter earnings expectations have risen sharply on the back of the strong department store division.
Nam said, "We expect same-store sales growth to be in the mid-10% range, and with broad-based growth across all categories, including luxury goods, apparel, fashion and accessories, the increase in operating profit should more than offset the weakness at ZINUS."
The second quarter is typically when property taxes are paid, and with relatively smaller sales, the effect on profit growth is limited.
However, sales of high-margin products are currently strong, and profit growth is expected to be maximized on sales growth exceeding expectations.
Nam added, "On top of that, strong duty-free results will contribute," noting, "Thanks to the foreign inbound effect, profitability at downtown duty-free shops is improving rapidly, and profit growth from operating the DF2 store at the airport is also anticipated."
Earnings momentum in the second half is also expected to strengthen. ◇ Improvements from completing efficiency work at ZINUS ◇ continued department store growth and expanded duty-free space at Incheon Airport ◇ and growth potential at The Hyundai Global.
Nam said, "In particular, although the impact of weak second-quarter results at ZINUS was in play, we expect the growth rate to expand further given that profit growth is possible."