[Click eStock] "Shinsegae Expected to Benefit Most During Consumer Spending Surge"

[Asia Economy Reporter Song Hwajeong] Daishin Securities raised the target price for Shinsegae from 340,000 KRW to 400,000 KRW on the 13th, expecting it to be the biggest beneficiary during the consumption explosion period. The investment opinion was maintained as 'Buy.'

Yoo Jeonghyun, a researcher at Daishin Securities, said, "The target price increase is due to upward revisions of the 2021-2022 earnings, considering a stronger-than-expected consumption recovery," adding, "During the consumption explosion period, Shinsegae is in the best position to benefit as a domestic mid-end and high-end consumer goods distribution channel."

Shinsegae achieved its highest-ever operating profit in the first quarter of this year. On a consolidated basis, total sales and operating profit for Q1 were 2.1754 trillion KRW and 123.6 billion KRW, respectively. These figures represent increases of 18% and 3659% compared to the same period last year. The department store's standalone total sales increased by 24%. January was somewhat sluggish due to strict social distancing measures, but explosive consumption recovery in February and March led to significant top-line growth. Operating profit rose 171% to 61.2 billion KRW. Shinsegae DF, the duty-free division, saw daily sales in Q1 recover to around 9 billion KRW, an 80% increase compared to the same period last year. Changes in the Incheon Airport duty-free rent system and a refund of duty-free license fees (3.3 billion KRW) resulted in operating profit of 23.1 billion KRW, turning the division profitable.

The momentum for earnings improvement is expected to continue. Researcher Yoo said, "Current sales in Q2 are understood to be better than in Q1," and forecasted, "The Daejeon branch is scheduled to open in Q3 this year, and with the full resumption of overseas consumption in 2022, the duty-free turnaround will sustain the momentum for earnings improvement."

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