[Click eStock] "Hanse Industrial: Bottom Buying Timing... Target Price Up"

Shinhan Investment Corp. raised the target price for Hanse Industrial to 33,000 KRW on the 14th, stating that "the third-quarter earnings this year exceeded expectations." The buy rating was also maintained. On the same day, researchers Hyunjin Park and Jieun Joo of Shinhan Investment Corp. said, "Hanse Industrial recorded consolidated sales of 512 billion KRW in the third quarter, down 13% compared to the same period last year. Operating profit was 60.6 billion KRW, down 8%," but added, "this exceeded both company estimates and market expectations."

They added, "Although sales in dollar terms declined by 11%, the rate of sales decrease was significantly reduced compared to the first half of the year," and explained, "Since the second half of last year, U.S. apparel consumption has slowed, and orders sharply declined due to excessive inventory. From the end of this year, global apparel inventory is expected to continue decreasing, and U.S. consumption tends to slightly raise expectations, which could lead to some improvement in the Original Equipment Manufacturing (OEM) business."

In particular, expectations grew as the performance improvement trend was highlighted mainly among some small and medium OEM companies that share buyers with Hanse Industrial. Since the fourth quarter of last year, Hanse Industrial reduced the number of production lines by more than 30% in preparation for order declines, resulting in a downward trend in labor costs compared to the same period last year, which is a positive factor for improving profit margins. Besides cost reduction raising margin rates, efforts to focus on profitability-oriented orders compared to the past also stood out.

Sales in the fourth quarter of this year are expected to increase by 6% compared to last year, and sales next year are projected to grow by 10% compared to this year. Researcher Park said, "Considering the changed margin level due to the easing of fixed cost burdens this year, operating profit in the fourth quarter could reach 40.4 billion KRW," adding, "The extent of Hanse Industrial's earnings improvement next year will depend on the strength of U.S. consumption recovery, but at least the possibility of sales being worse than this year is decreasing. U.S. apparel inventory is maintaining a downward trend and is just about to reach an appropriate level."

Researcher Park also said, "It is necessary to adjust earnings expectations with the possibility that inventory replenishment demand may gradually appear. It is a good idea to consider the bottom-buying timing while monitoring the U.S. consumption economy," adding, "Since the first half of this year’s earnings were very poor, the base effect for the first half of next year is fundamental. Despite showing profit levels comparable to Chinese OEM companies, the very low valuation (stock price level relative to corporate value) is a sufficient reason to buy."

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