[Click eStock] "F&F, Expecting Recovery in Earnings Momentum from China... Target Price Up"

Target Price Raised from 80,000 Won to 93,000 Won

Shinhan Investment Corp. raised the target price for F&F from 80,000 won to 93,000 won on the 12th, anticipating a recovery in earnings momentum. The investment rating was maintained as 'Buy.'

Hyunjin Park, a researcher at Shinhan Investment Corp., stated, "We are raising the target price due to an increase in earnings per share (EPS) estimates resulting from a change in valuation timing," adding, "With China's strong determination to stimulate its economy, there is potential for a recovery in earnings momentum from China. As the Discovery brand accelerates its store openings in China and the decline in domestic sales in Korea eases, the quarterly sales growth trend is likely to shift from negative to positive."

He expressed the view that the key to reversing the direction of sales growth lies in domestic performance. Park said, "Domestic sales had been declining by an average of 10% per quarter, partly due to sluggish domestic consumption but largely because of a decrease in sales to Chinese daigou (personal shoppers) at some stores in certain commercial districts," adding, "However, from the first quarter of this year, the decline in sales to Chinese daigou has eased, and the rate of domestic sales decline is expected to gradually reduce. Domestic sales are expected to turn to growth starting from the third quarter."

Sales in China are projected to grow by 6% year-on-year in the first quarter. Park noted, "From the second quarter, as Discovery accelerates store openings in China, F&F's Chinese stores are estimated to increase by an average net of 38 stores per quarter," adding, "The efficiency of wholesale sales per store, calculated by dividing Chinese subsidiary sales by the number of stores, appears to have stopped declining. This suggests that MLB's sales in China are stable." He further added, "Additionally, new store openings of brands such as Discovery and Duvetica in China are expected to drive China's sales growth rate above 10% in the second half of the year."

The stock price is still evaluated to be at a bottom level. Park said, "Although the stock price has risen considerably from its lowest point, it is still at the bottom in the mid to long term," adding, "Despite maintaining a double-digit return on equity (ROE), the valuation level is too low compared to other consumer goods companies."

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