[Click eStock] "Shinsegae International Expected to Improve Performance on Strong Luxury Growth... Target Price Raised"

On May 21, Mirae Asset Securities announced that it expects Shinsegae International's performance to improve significantly this year, raising its target price from 13,000 won to 19,000 won. The investment recommendation remains "Buy."

Song Bae, an analyst at Mirae Asset Securities, explained, "We are raising the target price to reflect the upward revision of our earnings estimates," adding, "Operating profit in the first quarter of this year surged over 200% compared to the same period last year, marking the onset of a successful turnaround. Growth in both department stores and foreign inbound demand has accelerated further in the second quarter, which will likely drive even greater improvements in Shinsegae International's results."

As a consumer discretionary company, Shinsegae International's performance tends to be highly sensitive to economic cycles, declining sharply during downturns and rebounding strongly during upturns. Last year, operating profit plunged due to weak consumer demand and increased costs such as fashion inventory valuation losses. However, considering this year’s business environment, a turnaround appears possible. Analyst Bae projected, "The company will return to profitability in the second and third quarters, and annual operating profit will expand significantly from last year’s break-even point to 58.9 billion won this year."

With its main channel—department stores—entering a phase of structural growth, Shinsegae International is also expected to benefit from this trend. Luxury segment growth is projected to continue propelling performance improvement. In the first quarter, the overseas fashion division, which has a high proportion of premium brands, posted a year-on-year sales growth of 35%, while imported cosmetics grew by 20%. According to Analyst Bae, "Overseas fashion accounts for 37% of total sales, and imported cosmetics for 30%, making them dominant contributors. Their share of profits is estimated to be even higher. The current consumer boom is most pronounced in discretionary goods and the luxury segment. Performance improvements led by luxury are expected to continue," he analyzed.

Rapidly increasing foreign demand is also expected to further support performance improvements. Foreign customers at department stores concentrate their purchases on luxury goods and fashion, which closely aligns with Shinsegae International’s business areas. Analyst Bae noted, "Shinsegae International's sales to foreign customers have grown over 60% year-on-year, with their share rising from 3% to around 5% during the same period. Department stores’ foreign sales rose by 20% to 90%, with the share increasing from about 5% to approximately 6%, indicating a similar trend. The company is expected to continue directly benefiting from the influx of foreign inbound demand along with department stores," he said.

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