Growing Expectations for Performance Improvement at GS Home Shopping... Will It Rise Further?

Foreigners and Institutions Lead... 16% Rise in One Month
Top Preferred Sector Stocks... Expectations for Earnings Improvement in Q4↑

[Asia Economy Reporter Minji Lee] GS Home Shopping is receiving strong expectations for improved performance. It has risen about 16% over the past month, establishing itself as the top preferred stock in the industry.

According to the Korea Exchange on the 30th, GS Home Shopping was priced at 143,000 KRW as of 9:30 AM, down 2.6% from the previous close. It is analyzed that high volatility was shown due to sell-offs for profit-taking on that day. Nevertheless, GS Home Shopping surged 16% over the past month while the KOSDAQ index fell about 4%. In the same industry, Hyundai Home Shopping rose only 1.5%, and NS Home Shopping fell 4.56%, but GS Home Shopping showed a strong upward trend.

Recently, the stock price increase of GS Home Shopping was led by foreigners and institutions. From the 1st of this month until the day before, foreigners and institutions bought stocks worth 17 billion KRW, ranking eighth in the KOSDAQ market in terms of purchase volume. They focused on GS Home Shopping’s improving performance. In the third quarter, GS Home Shopping’s operating profit grew about 94% year-on-year to 38 billion KRW. The home shopping sector did not receive much attention in the first half due to limitations in TV broadcasting and product categories. However, in the third quarter, the strengthening of social distancing measures due to COVID-19, a prolonged rainy season, and a late Chuseok holiday overlapped, leading to expected benefits. Among them, GS Home Shopping recorded an earnings surprise by significantly exceeding market expectations compared to other companies.

Increasing the proportion of high-margin, high value-added products and reducing selling and administrative expenses by cutting costs for education, business trips, and consulting positively impacted performance. They increased the share of high-margin health functional foods and daily necessities (masks) while excluding low-margin products like travel. The operating profit margin rose by 5.7 percentage points year-on-year as the ratio of selling and administrative expenses declined.

An Ji-young, a researcher at IBK Investment & Securities, said, "GS Home Shopping declared an internal emergency management system in the first half of this year and is actively strengthening sales management focused on profitability and operational cost efficiency." She added, "Assuming the effect of the profitability-focused selling and administrative expense policy continues, operating profit this year is estimated to grow about 26% compared to last year, exceeding 150 billion KRW."

Another investment attraction of GS Home Shopping is dividends. The market estimates GS Home Shopping’s dividend per share (DP) to increase by 500 KRW from last year to 7,000 KRW. The dividend yield is expected to continue its upward trend at 4.8% (3.9% in 2018, 4.4% last year).

In the securities industry, target prices are being raised. The previous target price range of 150,000 to 170,000 KRW has been raised to as high as 190,000 KRW. Park Hee-jin, a researcher at Shinhan Financial Investment, said, "Growth continued in October compared to the previous month, and other profit increases will continue with the increase in the proportion of high-margin product groups in the fourth quarter." He added, "GS Home Shopping’s pre-tax operating profit is estimated to exceed 160 billion KRW this year and 170 billion KRW next year, and considering the recent stock price rise, it is still undervalued."

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