[Click eStock] "Fila Holdings, Short-term Earnings Weakness Expected... Target Price Down 15%"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating on Fila Holdings on the 22nd but lowered the target price by 15% to 45,000 KRW. This reflects short-term performance uncertainties due to global supply risks and brand restructuring.

In the fourth quarter of last year, Fila Holdings' sales and operating profit decreased by 8% and 63% year-on-year to 859.3 billion KRW and 25.2 billion KRW, respectively. Acushnet recorded an operating loss of 21.8 billion KRW, while the Fila division posted an operating profit of 47 billion KRW. Fila's domestic sales and operating profit grew by 12% and 47%, respectively, showing a favorable performance. Although design royalties from China increased by 15% during the same period, U.S. sales declined by 10% due to supply chain disruptions.

The company expects this year's guidance to show sales and operating profit either slightly decreasing or growing only in the low single digits compared to the previous year. The U.S. royalty segment is expected to remain at a similar level to last year, while excluding Chinese design royalties, the domestic segment is projected to see a 10% decline in sales and a 40% decrease in operating profit.

Hyunjung Seo, a researcher at Hana Financial Investment, said, "The impact of global supply risks is expected to continue at least through the first half of the year in both domestic and U.S. markets," adding, "In the short term, increased investment to enhance brand value will inevitably lead to sales decline and cost burdens." Consolidated sales for this year are expected to increase by 3% year-on-year to 3.8939 trillion KRW, while operating profit is forecasted to decrease by 0.5% to 490 billion KRW.

Consumer response to the newly changed design is expected to be confirmed starting in 2023. Researcher Seo said, "If the sales growth rate exceeds the cost growth rate after brand value restructuring, it can be interpreted as a signal of brand strength improvement and uncertainty can be resolved," adding, "From a mid- to long-term perspective, buying at the bottom remains valid, but stock price momentum will not be significant until brand sales and recognition recover."

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