[Click eStock] "Shinsegae, Base Effects Effective Across All Sectors"

Ebest Investment & Securities Report

[Asia Economy Reporter Gong Byung-sun] Ebest Investment & Securities raised the target price for Shinsegae from 280,000 KRW to 300,000 KRW on the 18th, expecting a base effect across all sectors. The investment opinion was maintained as 'Buy.'

Shinsegae has been under the influence of COVID-19 since February last year, so a base effect is expected in the first quarter of this year. In January this year, the separate total sales amounted to 339.8 billion KRW, down 2.3% year-on-year due to the difference in the timing of the Lunar New Year holiday, but it is analyzed that the base effect is valid as duty-free shops suffered significant damage from COVID-19 last year. Growth centered on the Myeongdong store is expected by store.

Structurally, low-margin items are showing strong sales in department stores. Orin-ah, an analyst at Ebest Investment & Securities, predicted, "The department store separate segment will lead operating profit growth by reducing selling and administrative expenses."

The cost reduction effect that has continued since 2019 is also expected to appear. Shinsegae DF recorded impairment losses of 312 billion KRW in Q4 2019 and 64 billion KRW in Q4 last year. Analyst Oh said, "The cost reduction effect this year is estimated to be about 90 billion KRW."

In Q4 last year, Shinsegae's sales were 340.3 billion KRW, down 24.2% year-on-year, and operating profit was 103.1 billion KRW, down 46.9%, but generally in line with Ebest Investment & Securities' estimates. Analyst Oh explained, "Luxury goods sales in Q4 last year increased by 27% year-on-year, and the home appliances segment grew by 30%, showing continued high growth."

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