[Click eStock] "Shinsegae International, Apparel Sector Slump... Target Price Down 7%"

Yuanta Securities Report
Q3 Operating Profit 9 Billion KRW... 53% Decrease Compared to Same Period Last Year

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating on Shinsegae International on the 16th and set a target price of 200,000 KRW, down 7%. This is because although the sales of its own cosmetics brand, Vidivici, are showing signs of recovery, the sluggish performance in the apparel sector is expected to negatively impact earnings.

Shinsegae International's Q3 earnings are expected to show sales of 328.7 billion KRW and operating profit of 9 billion KRW, down 9% and 53% respectively compared to the same period last year. The year-on-year sales growth rates by segment are expected to be cosmetics (-19%), apparel (-10%), and lifestyle (9%). Yuanta Securities analyst Eunjeong Park explained, “We have lowered the previous profit estimate by 5.8 billion KRW, adjusting apparel by -4 billion KRW and lifestyle by -1.7 billion KRW by segment.”

The operating profit in the cosmetics segment is expected to turn positive to 12.6 billion KRW compared to the previous quarter. Vidivici sales are projected to rise 118% from Q2 to 41 billion KRW in Q3. Imported cosmetics are expected to record 31.4 billion KRW, indicating steady demand from domestic consumers. Analyst Park said, “Yeonjak’s sales are estimated to be around 2 billion KRW per quarter, similar to the previous quarter,” and added, “Considering that Vidivici’s sales improved compared to the previous quarter, the operating profit margin is expected to improve by 17% quarter-on-quarter.”

On the other hand, operating profit in the apparel and lifestyle segments is expected to turn to a loss of 2.3 billion KRW. This is due to sluggish demand and increased fixed cost burdens caused by the impact of COVID-19. Overseas fashion sales are expected to grow 4% year-on-year to 95.4 billion KRW, while domestic fashion sales are projected to fall 24% to 67.6 billion KRW during the same period. Although the number of stores in the lifestyle segment is expected to increase year-on-year, traffic is expected to decline due to the impact of COVID-19, resulting in a decrease in sales per store. Sales are estimated to grow 9% year-on-year to 65.2 billion KRW, and the segment is expected to record break-even level profitability.

Analyst Park Eunjeong stated, “As Chinese cosmetics consumption normalizes, domestic duty-free demand is also showing improvement,” and diagnosed, “For a sustained increase in corporate value, continuous growth in demand for the brand is necessary.”

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