[Click eStock] "F&F, Harsh Valuation... Overseas Momentum Valid"

[Asia Economy Reporter Myunghwan Lee] Shinhan Investment Corp. announced on the 24th that it maintains a Buy rating and a target price of 250,000 KRW for F&F. The company also expects solid earnings for the third quarter of this year.

Shinhan Investment projects F&F's consolidated sales for the third quarter of this year to increase by 32.5% year-on-year to 435.7 billion KRW, with operating profit growing 38.9% to 132.9 billion KRW. The operating profit is expected to exceed the market consensus of 124 billion KRW.

By brand under F&F, sales of 'Discovery Expedition' are expected to grow 27% compared to the same period last year, maintaining the growth rate of the previous quarter. During the same period, MLB is projected to grow 15%, and MLB Kids by 28%. Shinhan Investment diagnosed that most brands will grow driven by existing store growth rather than new store openings.

In particular, overseas export sales are expected to grow significantly, recording 209.2 billion KRW, a 56% increase from the same period last year, according to Shinhan Investment. This represents a 30% increase compared to the first quarter and a 76% increase compared to the second quarter. Although some effects of China's lockdown remain, offline store consumption recovery was rapid from June, and winter season orders in September likely contributed slightly to third-quarter results, Shinhan Investment expects. Currently, monthly sales per store in China are estimated at about 110 million KRW on average, placing F&F among the top in the industry.

Shinhan Investment diagnosed that despite F&F's continued overseas momentum, the stock is undervalued in the market. The company holds a strong position as the leading stock in the domestic casual fashion sector, and securing new growth momentum through subsidiaries is expected to contribute to mid- to long-term growth. Overseas profit contribution has grown to over 40%, making it inappropriate to classify F&F as a purely domestic company, and its valuation is considered too low compared to other overseas consumer beneficiaries.

Hyunjin Park, Senior Researcher at Shinhan Investment, advised, "Looking at the Chinese performance of overseas consumer goods companies, there appears to be a slight recovery in September compared to July and August. While it remains to be seen if this is a trend recovery, the business situation in China does not seem worse than now, so continuous attention is needed."

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