[Click eStock] "Shinsegae, 3Q Earnings Expected to Fall Short of Estimates... Target Price Down"

According to Incheon International Airport Corporation, multiple candidates have been selected for the business rights available to large corporations: Shilla and Shinsegae Duty Free for DF1-2, which sell perfumes, cosmetics, liquor, and tobacco; Shilla and Shinsegae Duty Free for DF3-4, which handle fashion, accessories, and boutiques; and Shilla, Shinsegae, and Hyundai Department Store Duty Free for DF5, which deals exclusively with boutiques. The photo shows the duty-free shops located in the boarding terminal of Incheon International East Airport on the 20th. Photo by Kang Jin-hyung aymsdream@

Yuanta Securities lowered the target price for Shinsegae from 290,000 KRW to 260,000 KRW on the 5th, anticipating that the company's third-quarter earnings this year will fall short of market expectations. The investment rating was maintained at 'Buy.'

Researcher Lee Seung-eun of Yuanta Securities stated, "The target price was lowered to reflect the expected third-quarter earnings," adding, "Shinsegae's valuation records the lowest price-to-earnings ratio (PER) of 5.6 times for 2024 among department stores, and particularly, the improvement in duty-free shop performance has not yet been reflected in the stock price."

Shinsegae's third-quarter earnings are expected to fall short of market expectations. Yuanta Securities forecasted Shinsegae's third-quarter revenue to decrease by 13.2% year-on-year to 1.6978 trillion KRW, and operating profit to decline by 11.1% to 136 billion KRW. The operating profit is below the market expectation of 162.2 billion KRW. The researcher explained, "The department store segment is expected to see a contraction compared to the same period last year, which experienced over 20% high growth in the third quarter, and the duty-free shop segment is expected to see a decrease in daily sales at airport duty-free shops due to the closure of Terminal 1 operations."

From the fourth quarter, a significant improvement in performance is anticipated. The researcher forecasted, "The department store segment is expected to experience positive growth as the high base effect from the previous year disappears, with an increase in sales growth rate in the luxury goods segment," and added, "Although group tourists from China are currently visiting the duty-free shops, the increase is not yet significant, but substantial growth is expected starting in October." The researcher further noted, "For the improvement in duty-free shop performance to be reflected in the stock price, the growth in sales from group tourists must become visible," and added, "The period after the fourth quarter will be a phase for valuation reassessment."

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