[Click eStock] "Clio, Earnings Expectations Rise as Mask Wearing is Lifted"

by Kwon Jaehee

Published 19 Apr.2022 08:32(KST)

[Click eStock] "Clio, Earnings Expectations Rise as Mask Wearing is Lifted"

[Asia Economy Reporter Kwon Jae-hee] Hyundai Motor Securities upgraded its investment opinion on Clio to 'Buy' on the 19th, maintaining the target price at 25,000 KRW.

It is expected that a favorable growth trend will continue, centered on the domestic online and Japanese markets, due to improved investment sentiment following the recovery of daily life.

Clio's performance in the first quarter of this year is forecasted to record sales of 65.5 billion KRW and operating profit of 3.4 billion KRW. This represents an increase of 12.9% and 69.7% respectively compared to the same period last year, and is expected to meet market consensus.

The basis for this performance forecast is the expectation that the break-even point (BEP) will be achieved within the year through store efficiency improvements and expansion of online and home shopping channels. Although Club Clio, the domestic offline channel, continues to see sales decline due to a reduction in the number of stores by about 1.2 billion KRW, offline channel sales are offsetting this through store efficiency improvements. The operating profit effect from improved channel profitability is estimated at about 1.6 billion KRW compared to the previous year, and in particular, home shopping is expected to see additional sales growth as the number of broadcasts increases.

Online and global sales are also forecasted at 25.5 billion KRW and 10 billion KRW respectively. Although online sales are estimated to have declined by about 30% year-on-year due to lockdowns and consumption slowdown in China and major cities by region, Japan showed relatively favorable growth with a 15% increase during the same period. Additionally, in Japan, the number of offline stores increased during the COVID-19 period, so sales growth is expected to strengthen further once local COVID-19 restrictions ease.

Jeong Hye-jin, a researcher at Hyundai Motor Securities, analyzed, "Although uncertainties exist in the Chinese market, performance is expected in the domestic and Japanese markets, and with recent normalization of quarantine measures such as the lifting of mask mandates in Korea, performance is judged to have passed the bottom." She added, "If the main channels, especially online, maintain a high growth rate of over 20% annually, the earnings momentum will strengthen, making further upward trends possible."