[Click eStock] "Fila Holdings, COVID-19 Impact Reflected with 16% Target Price Cut"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Fila Holdings on the 29th and set a target price of 53,000 KRW, down 16% from the previous target. Although the value as a global brand is significantly undervalued, the stock price was lowered reflecting the substantial damage the brand suffered during the COVID-19 situation.

Fila Holdings' sales in the fourth quarter are expected to reach 838.5 billion KRW, with operating profit of 85.7 billion KRW, representing growth of 5% and 26% respectively compared to the same period last year. Domestic sales excluding Chinese commission fees are expected to increase by 6% year-on-year, and operating profit is projected to grow by 118%. The growth rate of commission income from China is estimated to slightly decline in the fourth quarter.

Researcher Jeonghyun Yoo of Daishin Securities analyzed, "Domestic operating profit will surge due to the 6 billion KRW inventory disposal loss recorded in the same period last year," adding, "Excluding this effect, the actual operating profit improvement is estimated to be around 3%."

Although the U.S. subsidiary's sales were affected by disruptions in the global supply chain, making it difficult to source low-priced products, the proportion of high-priced product sales increased, leading to an expected growth of about 4%. Operating profit is predicted to turn positive as one-time costs related to the logistics center shutdown in the fourth quarter of last year disappear. Royalties are expected to decrease by about 3% due to weakened consumer sentiment in the fourth quarter caused by the Omicron variant.

Researcher Yoo stated, "Although Acushnet will show solid demand despite the golf off-season in the fourth quarter, operating profit is expected to decline by 8% due to the high base effect from last year's strong performance."

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