[Click eStock] Shinsegae, No.1 in Distribution... Expecting Momentum from Department Store Profit Improvement

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 7th that it maintains a buy rating and a target price of 400,000 KRW for Shinsegae. The target price is based on a 12x price-to-earnings ratio (PER) forecast for 2022.

Yoo Jeong-hyun, a researcher at Daishin Securities, stated, "The existing store growth rate of the company's department stores in January was 29%, indicating very strong domestic consumption," adding, "As the favorable consumption trend continues, the company is expected to outperform other companies in the retail sector in both earnings and stock price by further widening the brand gap."

Among the three major department store chains last year, the top 20 stores by total sales recorded a sales growth rate of 26% (Shinsegae +26%, Lotte +18%, Hyundai +34%). Considering that Hyundai Department Store's new store, The Hyundai Seoul, had a significant effect last year, the so-called existing stores' sales recovery strength was overwhelmingly higher for Shinsegae. This is because the consumers in the areas covered by the major stores largely overlap with the higher-income class.

This year, with the second year of the Daejeon store opening, the sales from the 1st to 3rd quarters of this store are newly reflected, adding approximately 450 billion KRW to total sales, and the effect of incorporating Gwangju Shinsegae (added in the 4th quarter of the previous year and additionally reflected in the 1st to 3rd quarter results this year) is expected to increase operating profit by 49 billion KRW. Researcher Yoo emphasized, "Even if the consumption growth rate slows down more than initially expected, the department store operator is expected to show the most prominent momentum for profit improvement."

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