[Click eStock] Hyundai Department Store, Accelerating Earnings Recovery 'Undervalued'

Kiwoom Securities announced on the 23rd that it maintains a Buy rating and a target price of 76,000 KRW for Hyundai Department Store. This is based on the expectation that as duty-free store performance improves and the existing store growth rate of the department store rebounds from the second quarter low, the momentum for earnings improvement will strengthen in the second half of the year. The current stock price is at a 12-month forward price-to-earnings ratio (PER) of about 5 times, indicating a relatively high absolute valuation attractiveness.

Park Sang-jun, a researcher at Kiwoom Securities, explained, "We expect Hyundai Department Store's consolidated operating profit for the second quarter to be 71.7 billion KRW, exceeding our previous forecast of 63.7 billion KRW. The sales of the recently reopened Daejeon Hyundai Premium Outlet are recovering rapidly, and the profitability of the duty-free store is improving quickly due to the increased proportion of FIT sales."

He predicted that the existing store growth rate of the department store and the operating profit of the duty-free store will improve in the third quarter compared to the second quarter. The consumer sentiment index has rebounded significantly from its low point (86.5 in November 2022 to 98.0 in May 2023), the sales recovery speed is accelerating due to the reopening of the Daejeon outlet, and the proportion of foreign sales is expanding mainly at Yeouido (The Hyundai Seoul), Trade Center, and Dongdaemun stores. Additionally, since the sales base will be lower from the fourth quarter, the monthly existing store growth rate is expected to show a steady upward trend.

Regarding the duty-free store, an increase in outbound and inbound tourists and the opening of Incheon Airport DF5 (boutique) in the third quarter are expected to cause a sharp rise in FIT sales. Researcher Park said, "The FIT channel is significantly more profitable compared to Daigo, and Incheon Airport DF5 has relatively low rental costs, so it is likely that operating profit will turn positive in the third quarter."

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