Home Shopping Stocks with Bright Q3 Outlook... Positive Sentiment Reflected in Stock Prices Upward

Chuseok Holiday Suspension of Hometown Visits Also Positive for Home Shopping Industry Conditions

[Asia Economy Reporter Geum Boryeong] As the third-quarter earnings of home shopping companies are likely to exceed initial expectations, market interest in valuation recovery is gathering.

According to Hana Financial Investment on the 15th, the transaction volume of Hyundai Home Shopping and GS Home Shopping is estimated to increase by more than 5% year-on-year in the third quarter.

In the home shopping market, consumption is shifting from intangible products to tangible products. The proportion of low-margin intangible products such as travel and rentals is significantly decreasing, while the sales proportion of high-margin tangible products such as health functional foods, home appliances, and daily necessities is rising, enabling expectations for an improvement in gross profit margin (GPM). Additionally, the suspension of hometown visits during the Chuseok holiday due to the novel coronavirus infection (COVID-19) is also positive for the home shopping industry.

Park Jongdae, a researcher at Hana Financial Investment, said, "As the travel market shrinks due to the spread of COVID-19, consumption of tangible products is recovering. This is the exact opposite phenomenon compared to the past 10 years," adding, "Home shopping is benefiting greatly. The valuation recovery of home shopping companies, which had been continuously undergoing de-rating, is also a point to watch closely."

In the case of Hyundai Home Shopping, KB Securities expects operating profit in the third and fourth quarters to increase by 58% and 23% year-on-year, respectively. This is because the visibility of performance in the home shopping sector has improved due to stabilization of transmission fees and reduction of selling and administrative expenses, and the profits and losses of subsidiaries are also showing improvement every quarter.

Park Shinae, a researcher at KB Securities, explained, "We expect Hyundai Home Shopping's consolidated third-quarter earnings to be 564.7 billion KRW, with an operating profit of 32.1 billion KRW," adding, "The home shopping sector's performance is expected to see a 5% increase in transaction volume to 968.8 billion KRW year-on-year, with strong sales of high-margin products such as health supplements, food, and masks."

Hana Financial Investment also estimates that GS Home Shopping's third-quarter operating profit will increase by 21% year-on-year to 24 billion KRW. The transaction volume is also highly likely to increase by more than 5% compared to the previous year.

The expectations have been reflected in stock prices. Hyundai Home Shopping's stock price, which was 62,800 KRW on the 7th, rose 21% to 76,000 KRW within a week. During the same period, GS Home Shopping's stock price also increased by 9.93%, from 116,800 KRW to 128,400 KRW.

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