[Click eStock] "F&F, Focus on China Momentum in the Short Term"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating and a target price of 230,000 KRW for F&F on the 2nd, citing expectations for MLB's expansion of sales in China.

In the second quarter, F&F's consolidated sales reached 371.4 billion KRW, a 19% increase compared to the same period last year, and operating profit also rose by 26% to 95 billion KRW. Both sales and operating profit exceeded market expectations. Operating profit margin improved by 1.4 percentage points to 25.6%, reflecting the leverage effect from increased sales.

By business segment, MLB Korea's pure domestic sales grew 26% year-on-year to 67.3 billion KRW, but sales in the duty-free sector declined by 38% to 38 billion KRW. This was due to a contraction in the activities of peddlers caused by the Chinese government's lockdown policies.

Discovery is expected to achieve sales of 96 billion KRW, a 28% increase year-on-year, supported by a strong recovery in overall domestic apparel consumption despite a high base effect. MLB Kids' duty-free sales are expected to fall by around 54% year-on-year, but thanks to solid growth in domestic sales (45%), total sales are projected to increase by 17% to 21 billion KRW.

Shinae Park, a researcher at KB Securities, explained, "The domestic business is also maintaining high growth each quarter, supported by strong brand competitiveness and the recovery trend in apparel consumption. The only weak segment is the duty-free channel, but it is expected to improve from the second half of the year."

Sales from the Chinese subsidiary reached 107 billion KRW. Offline sales were 90 billion KRW, and online sales were 17.2 billion KRW, growing 88% and 37% respectively compared to a year ago. Despite the Chinese government's lockdown measures in April and May, researcher Park said, "The Chinese subsidiary's sales showed a strong growth of 77% year-on-year, thanks to an increase in the number of stores and a rapid recovery in sales after the easing of lockdown measures at the end of May."

The current stock price is undervalued at about 13 times the 12-month forward PER. Researcher Park stated, "In the short term, MLB's expansion of sales in China and, in the mid-to-long term, the diversification effects of businesses such as golf equipment and tennis apparel are expected to drive a steady rise in the stock price."

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