[Click eStock] Hyundai Department Store, Undervalued with Earnings Improvement and Duty-Free Shop Turning Profitable

Hana Securities announced on the 5th that it maintains a buy rating and a target price of 78,000 KRW for Hyundai Department Store. This is based on the judgment that concerns over the department store's performance decline have been alleviated and considering the visibility of the duty-free store's performance, the current stock price is significantly undervalued. Seo Hyun-jung, a researcher at Hana Securities, stated, "A significant stock price rebound is expected due to a performance rebound in the second half of the year," adding, "Increasing the weighting is effective."

For the second quarter, total sales are expected to increase by 2% year-on-year to 2.4861 trillion KRW, and operating profit is forecasted to rise by 4% to 73.8 billion KRW. The same-store sales growth rate for the department store is estimated to remain at a level 0.4% lower than the same period last year. Researcher Seo analyzed, "Sales in April and May decreased by about 2% year-on-year due to the high base of the previous year, but from mid-June, the Daejeon branch, which had suspended operations, resumed, resulting in a growth rate increase of over 3%."

Second-quarter duty-free store sales are expected to decrease by 26%, but operating losses are projected to reduce by about 3.3 billion KRW. He noted, "Although the sales decline was inevitable due to the profitability strategy of reducing commission rates for daigongs, the proportion of FIT (Free Independent Travelers) rose to around 25%, leading to a significant improvement in profit levels," and added, "Zinus is estimated to see a 14% decline in both sales and operating profit."

The department store's performance is expected to improve quarter by quarter, with the second quarter as the bottom. This is because the Daejeon Outlet, which had negatively impacted same-store sales growth, has started to resume operations and is rapidly recovering. Researcher Seo said, "Even excluding the Daejeon branch, large stores such as The Hyundai and Pangyo branches continue to show high external growth, and as the base from the previous year lowers toward the second half, the department store sales growth rate is expected to gradually recover," adding, "The proportion of foreign tourist sales has also risen to 4%, so its contribution to performance is expected to increase."

It is also encouraging that losses in the duty-free store business are significantly decreasing. For the second quarter, operating losses are estimated to have decreased by more than 10 billion KRW year-on-year and by more than 12 billion KRW compared to the previous quarter. Researcher Seo stated, "As the proportion of individual travelers expands, this trend is expected to continue, and a turnaround to profitability is possible in the third quarter," adding, "With limited slowdown in department store performance and rapid improvement in duty-free store profits, performance momentum is expected to further expand toward the second half."

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