Hanssem Faces Slowing Earnings Improvement... Target Price Cut by 10% [Click e-Stock]

Shinhan Investment & Securities: "Housing Transaction Volume Expected to Slow Down"

On August 13, Shinhan Investment & Securities lowered its target price for Hanssem, a company specializing in furniture and interior solutions, by 10% from 50,000 won to 45,000 won. Its investment rating was also downgraded from “Buy” to “Trading Buy.” The potential upside compared to the closing price on the 11th (42,300 won) is limited to 6.44%.

Sunmi Kim, a researcher at Shinhan Investment & Securities, commented, “Although profit growth through cost-efficiency and improved product mix is a positive, the company will need to scale up its total sales for sustainable growth.” She added that, given the challenges in achieving structural growth as seen in previous years, the recovery of the housing market in non-metropolitan areas remains the only hopeful factor.

Hanssem’s consolidated sales for the second quarter reached 417.2 billion won, with operating profit recorded at 11.3 billion won. Operating profit fell 6.6% short of market expectations. While the business-to-business (B2B) segment’s sales dropped 29% year-on-year, this decline was offset by the business-to-consumer (B2C) segment. The increase in housing transactions during the second quarter and a 40% rise in premium kitchen product sales contributed to this result. The operating margin was 2.7%, registering a slight improvement from 2.5% in the first quarter.

Although housing transaction volume has slowed in the third quarter, profit improvement is expected to continue driven by the expansion of premium products and enhanced marketing. However, the increase in profit is expected to be limited due to a reduction in business days during the Chuseok holiday, as well as increased costs following the acquisition of Nexus. Operating profit for the third quarter is forecast to reach 8.7 billion won, up just 26.6% from a year earlier. As the effects of cost efficiency—which began in 2024—have reached their limits, analysts point out that further profit growth will depend on actual sales expansion going forward.

Due to expectations that metropolitan area housing transactions will slow, driven by tighter lending regulations and strengthened taxation, next year’s (2027) operating profit forecast has been cut by 21.5%. Reflecting these factors, the target price calculated using the sum-of-the-parts (SOTP) method has been set at 45,000 won, 10% lower than the previous target. The target multiple was also lowered from 18 times to 17 times.

Kim added, “Despite unstable market conditions in the second quarter this year, profit improvement continued.” However, she cautioned, “Even after accounting for the company’s stock buyback and cancellation, the room for further upside is limited, and restoring sales volume is crucial at this juncture.”

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