[Click eStock] Hyundai Department Store, Expecting Recovery in Both Performance and Valuation

Shinhan Investment Corp. announced on the 11th that it maintains a Buy rating and a target price of 73,000 KRW for Hyundai Department Store. While the single holding company system is positive for corporate value, it is necessary to focus on the recovery of duty-free shops and Zinus rather than concerns about the department store peak-out, as well as the historically low valuation (12-month forward PER of 4.5 times).

Researcher Jo Sang-hoon of Shinhan Investment Corp. stated, "Despite solid department store performance over the past two years, concerns about peak-out have persisted, causing corporate value to decline. Although performance is expected to slow in the first half due to the base effect and increased costs at department stores, a rebound is possible in the second half with the reopening of the Daejeon branch." He added, "The duty-free shops are positive due to brand replacement work in the second half, a decrease in commission rates, and the operation of the Incheon Airport duty-free shop (DF Zone 5)."

The Hyundai Department Store Group announced a single holding company system with Hyundai G.F. Holdings as the holding company. Unlike the previous system where Hyundai Department Store and Hyundai Green Food operated as separate holding companies, Hyundai G.F. Holdings, which has already been established, will become the single holding company incorporating Hyundai Department Store as a subsidiary. Hyundai G.F. Holdings plans to conduct a public tender offer for shares of Hyundai Green Food and Hyundai Department Store (from August 11 to September 1) and implement a paid-in capital increase through a contribution in kind. Upon completion of the tender offer, the holding company's stake in the operating companies will be 40% in Hyundai Green Food and 32% in Hyundai Department Store, respectively.

Researcher Jo explained, "The change to a single holding company system is positive in two ways. First, concerns about affiliate separation and overhang (such as the sale of 12.1% of Hyundai Department Store shares held by Hyundai G.F. Holdings) have all been resolved. Second, shareholder return policies, including dividend increases, can be strengthened."

Meanwhile, second-quarter sales and operating profit are expected to record 1.19 trillion KRW (+5.8%) and 72.4 billion KRW (+1.7%), respectively, in line with consensus. Similar to the first quarter, department stores and Zinus were sluggish, but the duty-free deficit is expected to shrink significantly.

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