[Click eStock] "Shinsegae International, Cosmetic Margin Recovery Is Key... Target Price Down"

[Asia Economy Reporter Song Hwajeong] On the 14th, Daishin Securities downgraded the target price of Shinsegae International from 260,000 KRW to 230,000 KRW, viewing whether the cosmetics margin recovers as the key to future valuation. The investment opinion was maintained as 'Buy.'

Yoo Jeonghyun, a researcher at Daishin Securities, explained, "Considering the lowered valuation of the cosmetics sector, we applied a target price-to-earnings ratio (PER) of 18 times (the average for the cosmetics industry) instead of the previous 24 times, lowering the target price."

Due to polarization in the domestic fashion market, high-priced overseas fashion businesses have maintained favorable performance, but the domestic fashion brand business has continued to struggle, leading to structural reorganization such as merging domestic fashion with overseas fashion in October. Researcher Yoo said, "This will be positive for improving the efficiency of the fashion business in the mid to long term."

In the cosmetics division, although the performance of imported cosmetics continues to be strong, Vidi Vici's sales have stagnated at around 7 billion KRW per month, and ongoing investments related to new cosmetics brand businesses have lowered the cosmetics division's margin to below 10% this year. Researcher Yoo analyzed, "Considering that the cosmetics business contributed to the valuation expansion of Shinsegae International, the key to future valuation will be whether the cosmetics business margin recovers."

Shinsegae International's fourth-quarter performance this year is expected to be driven by overseas fashion and cosmetics divisions. Daishin Securities estimated Shinsegae International's fourth-quarter sales at 389.6 billion KRW and operating profit at 26.8 billion KRW, representing increases of 2% and 54%, respectively, compared to the same period last year. Researcher Yoo said, "Imported cosmetics will continue high growth in the fourth quarter, with the cosmetics division's operating profit margin reaching 9.5%. While imported fashion brands continue high growth, domestic fashion will be merged into the imported fashion division due to the downsizing of the Days brand business and sluggish sales of in-house brands, resulting in a 6% growth in sales for the integrated fashion division."

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