GS Home Shopping Proves to Be a 'COVID-19 Defensive Stock'... "No Concern for Further Stock Price Decline"

[Asia Economy Reporter Kum Bo-ryeong] An analysis has emerged that GS Home Shopping has proven to be a defensive stock against the novel coronavirus infection (COVID-19).

According to Shinhan Financial Investment on the 9th, GS Home Shopping's separate operating profit for the first quarter of this year recorded 31.9 billion KRW, a 16.9% decrease compared to the same period last year, meeting market expectations. In particular, when excluding the one-time profit of 12 billion KRW reflected in the same period last year, it increased by 20.9%, showing a favorable trend. The transaction amount was 1.0951 trillion KRW, a 0.2% increase. By channel, TV including T-commerce increased by 0.4%. Considering the average annual negative growth rate of -8.1% last year, this represents a favorable rebound.

Researcher Park Hee-jin of Shinhan Financial Investment analyzed, "This is a reflection of the benefits from the expansion of staying at home due to COVID-19," adding, "Especially, due to the impact of COVID-19, the proportion of high-priced, low-margin intangible asset products such as travel and rental cars decreased, resulting in a somewhat lower transaction growth rate, but margin improvement drove favorable profit growth."

Good performance is expected to continue in the second quarter as well. The separate operating profit for the second quarter is forecasted to increase by 19.3% year-on-year to 38.9 billion KRW. Researcher Park said, "Similar to the previous quarter, the proportion of high-priced, low-margin products, military travel products, and rental cars is at a lower level compared to the same period last year. Although the overall transaction amount growth rate did not rebound as much as expected from the COVID-19 benefits due to the expanded proportion of health functional foods and food products benefiting from the reflection effect, the margin improvement trend is expected to continue through the second quarter," explaining, "Quarterly transaction amount is estimated to increase by 0.1% to 1.1211 trillion KRW."

There is an analysis that concerns about further stock price declines will no longer exist. GS Home Shopping's closing price on the 8th was 125,000 KRW. Researcher Park said, "Despite being a representative beneficiary stock of expanded home consumption, the stock price trend was sluggish. However, this performance has proven it to be a COVID-19 beneficiary stock," adding, "Considering the value of cash and cash equivalents held (cash equivalents ratio to market capitalization expected this year is 69.1%) and asset value momentum, there is no concern about further declines. We suggest a 'buy' strategy as a defensive stock."

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