[Click eStock] "Hyundai Department Store Expected to Return to Profit in 3Q... Target Price Up"

NH Investment & Securities on the 5th raised the target price for Hyundai Department Store from 72,000 KRW to 90,000 KRW, citing simultaneous improvements in the performance of both the department store and duty-free shop sectors, which could lead to a turnaround in operating profit in the third quarter of this year after a year. The investment rating was maintained as 'Buy.'

Joo Young-hoon, a researcher at NH Investment & Securities, explained, "The main reason for the target price increase is the valuation change reflecting the recovery in department store performance and the rise in duty-free shop value due to the resumption of sales of Chinese group tour products (from 7.0x to 9.4x)." He added, "Considering that the price-to-earnings ratio (PER) was around 10x just before the outbreak of COVID-19 in 2019, this is an achievable figure."

It is expected to break away from the declining profit trend that continued for the past three consecutive quarters in the third quarter of this year. NH Investment & Securities forecast Hyundai Department Store's consolidated third-quarter results to show sales of 1.052 trillion KRW, down 23% year-on-year, and operating profit of 98.1 billion KRW, up 6%. Researcher Joo said, "The same-store sales growth rate of the department store is expected to be 5%, and the effect of reopening the Daejeon branch is positive as it is recording a higher sales growth rate compared to competitors." He analyzed, "The duty-free shop is expected to achieve its first-ever quarterly profit thanks to the opening effect of the Incheon Airport duty-free shop." He added, "Sales related to Chinese group tourists are expected to start occurring from mid-September, and significant contributions to performance will begin from the fourth quarter."

NH Investment & Securities maintained its top pick rating within the industry for Hyundai Department Store. Researcher Joo said, "The duty-free shop achieved a significant improvement in profitability in the first half of the year, raising expectations for its first-ever profit turnaround in the third quarter, and additional performance growth is expected due to sales of Chinese group tour products." He added, "Since improvements in the performance of the core business divisions are occurring simultaneously, we maintain our top pick rating within the industry."

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