[Click eStock] "Fila Holdings, Target Price Lowered by 17%"

Subsidiary Acushnet's Performance Significantly Deteriorates
KB Securities Lowers Fila Holdings Target Price from 60,000 KRW to 50,000 KRW

(Provided by KB Securities)

[Asia Economy Reporter Gong Byung-sun] KB Securities has downgraded the target price of Fila Holdings. It is interpreted that the poor performance of its subsidiary Acushnet negatively impacted the earnings.

On the 25th, KB Securities maintained its investment opinion of "Buy" for Fila Holdings but lowered the target price by 17% from the previous 60,000 KRW to 50,000 KRW. The closing price on the previous day was 30,650 KRW.

Poor earnings are expected. KB Securities estimated Fila Holdings' Q4 sales last year to increase by 1% year-on-year to 801.1 billion KRW, while operating profit is expected to decrease by 62% during the same period to 26.2 billion KRW. These figures are 1.9% and 55% below the respective market consensus.

The performance of the golf brand Acushnet appears to have deteriorated significantly. As of 2020, Acushnet's sales accounted for 61% of Fila Holdings' total, indicating its significant influence. KB Securities estimated Acushnet's Q4 sales last year to have decreased by 4% year-on-year and an operating loss of 27.2 billion KRW. Shin-ae Park, a researcher at KB Securities, explained, "It is presumed that the performance temporarily worsened due to inventory depletion and research and development (R&D) expenses ahead of the launch of a new golf ball product in Q1 this year."

However, the performance of the Fila brand is expected to show improvement, supported by a low base effect. KB Securities forecast that Fila brand's sales and operating profit will grow by 7% and 38%, respectively. Domestic market performance is also expected to increase, and the U.S. market's operating profit is anticipated to turn positive.

In particular, pure domestic sales are expected to grow by 5% year-on-year, and operating profit is projected to increase by 109%, influenced by inventory write-off costs of 4 to 5 billion KRW incurred in the same period last year. Researcher Park said, "Although there are concerns about the mid- to long-term growth potential and competitiveness of the Fila brand, even considering this, it remains significantly undervalued."

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