[Click e-Stock] "Shinsegae Department Store Expected to Grow Over 20% in Q2... Target Price Raised"

On June 10, Hanwha Investment & Securities raised its target price for Shinsegae from 6.6 million won to 7.7 million won, forecasting that the department store division will continue its overwhelming growth in the second quarter of this year. The investment opinion remained 'Buy'.

Jinhyup Lee, a researcher at Hanwha Investment & Securities, explained, "The main reason for the upward revision of the target price is the increase in the department store's target price-to-earnings ratio (PER) from 13 times to 15 times." He continued, "Based on managed sales, we estimate that same-store sales growth for the department store in the second quarter will be in the high 20% range. Although there are two fewer holidays in June compared to the previous year, creating an unfavorable business environment, we believe a growth rate above 20% can still be maintained."

This high growth trend appears to be driven by continued strength in domestic demand, as well as increased contributions from foreign customer sales. Compared to competitors, Shinsegae is showing a growth rate about 10 percentage points higher. Lee noted, "This is due to a relatively high proportion of luxury sales compared to competitors and the effects of the flagship store's renewal." He added, "This relative outperformance compared to competitors is likely to continue at least until November, when the baseline for the flagship store renewal will be comparable across the sector. While the department store's margin expansion has been somewhat weaker than competitors due to increased depreciation expenses from the renewal, we believe that, starting in the second half of the year, as the depreciation baseline rises, the operating leverage effect will be more fully realized."

The duty-free business is also evaluated to be maintaining a solid level, even after withdrawing from Incheon Airport DF2. Lee stated, "We estimate the duty-free store's average daily sales in May to be about 8.5 billion won, which is solid considering that the DF2 withdrawal occurred at the end of April." He continued, "Average daily sales in the first quarter were about 9 billion won. This appears to be the result of a sales boost focused on downtown stores. In addition to the improvement in downtown store efficiency confirmed in the first quarter, the withdrawal from the airport store in the second quarter is likely to further upgrade the profitability of the duty-free business."

However, for further upward revisions to duty-free earnings forecasts, sustained top-line growth will be necessary. Lee noted, "Ultimately, we need to see evidence of sustained top-line growth," adding, "It is positive that sales are rebounding, especially at downtown stores."

This content was produced with the assistance of AI translation services.