[Into the Stock] Hanssem, Accelerating Earnings Growth..."Not a Temporary Benefit from COVID-19"

[Asia Economy Reporter Minji Lee] Although it was thought that prices had already risen as much as possible, the securities industry says they can go higher. As COVID-19 has lasted longer than expected, demand for home decoration continues, and structural growth in the rehouse sector is anticipated. Currently, Hanssem's one-year stock price increase rate is 92%, marking the highest stock price level in three years.

Hanssem is the number one company in Korea in comprehensive furniture and interior fields, including kitchen furniture. Its main business sectors consist of the B2C area, including kitchen and rehouse sectors and interior sector, and the B2B (business-to-business) area, which includes special sales and direct sales divisions.

Rehouse Sales Growth Continues... Q1 Profit Up 12%

Hanssem's consolidated sales for the first quarter amounted to 553.1 billion KRW, showing a 12% growth compared to the same period last year. Operating profit is expected to reach 25.2 billion KRW, a 47% increase over the same period. The strong Q1 performance was driven by sales growth in the B2C (business-to-consumer) sector.

Looking at sales growth by sector, B2C sales reached 397 billion KRW, up 24% year-on-year, while B2B sales decreased by 11.4% to 104.7 billion KRW.

A notable point in the Q1 results is the rehouse sector. The rehouse business provides a total solution tailored to consumers' lifestyle patterns and life cycles. The focus is on expanding package purchases rather than single-item purchases. Sales grew 21.5% year-on-year but slightly decreased compared to the previous quarter. However, in March alone, sales reached 63.7 billion KRW, surpassing the previous high of 61.1 billion KRW recorded in November last year, raising expectations for further growth in Q2.

The B2C business usually correlates with apartment sales volume, but due to significant growth in the rehouse sector, this formula did not hold in Q1. Despite apartment transactions decreasing from 243,000 in January last year to 194,000 in January this year, the B2C sector recorded its highest-ever sales. The number of direct construction packages in the rehouse sector also increased by approximately 211% to 1,823 cases compared to Q1 last year.

Jinseong Ra, a researcher at KTB Investment & Securities, explained, “The number of construction workers for home modeling installation was increased by 692 from the previous year to 3,030, addressing the accumulated bottlenecks compared to the lower demand in the second half of last year.” He added, “As sensitivity to apartment sales volume has eased, expectations for structural growth are rising.” The company plans to secure about 5,000 construction workers this year.

Hanssem states that the rehouse sector is the business that will be responsible for the company's next 10 years. The rehouse business division aims to continuously expand premium showrooms nationwide and strengthen the direct construction system. As of last year, there were 57 large showroom-type stores, and about 30 additional stores are planned to be launched this year. Furthermore, to increase the adoption rate of direct construction, related packages will be expanded to 1,823, significantly increasing compared to Q1 last year (1,823 packages).

"Not a Temporary Benefit from COVID-19"... Securities Industry Raises Expectations

The securities industry has analyzed that Hanssem's stock price rose last year reflecting the demand for home decoration during COVID-19 stay-at-home periods. However, this year, it is viewed not just as a benefit from COVID-19 but as a continuation of structural growth in the rehouse sector.

According to financial information provider FnGuide, Hanssem's sales and operating profit this year are expected to be 2.3041 trillion KRW and 119.7 billion KRW, respectively, representing growth of 11% and 28% compared to the previous year. The target stock price was set at up to 160,000 KRW. As of 11:30 AM on the day, the stock price was 120,000 KRW, suggesting an additional rise of about 33%. Since Q2 last year (April), furniture sales have grown by more than 20% due to increased time spent at home from COVID-19, which has posed some performance pressure, but sales growth is expected to offset this.

The B2B sector, which was sluggish due to a decrease in move-in volume in Q1, is expected to accelerate performance growth from next year. This is because the increase in housing supply from 2019 and last year is expected to begin move-ins from the second half of this year. The expected apartment move-in volume in Seoul for Q2 is about 6,500 households, smaller than the 13,000 households in the same period last year.

Additionally, Hanssem is aiming to expand market share through recent changes in sales channels and strategies. The company plans to focus on expanding online channels, offering services such as ‘SamLive,’ a live commerce platform, and ‘Naemam Delivery,’ which provides delivery on designated dates.

Researcher Kiryong Kim of Yuanta Securities said, “Expanding market share through changes in sales channels and strategies, as well as launching smart packages in collaboration with Samsung Electronics, is expected to contribute to increasing influence in the market.” He added, “Attention should be paid to Hanssem's expanding influence and growth potential rather than viewing it as a temporary benefit from COVID-19.”

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