Korea Investment & Securities announced on June 9 that it has raised its target price for Hyundai Department Store from 140,000 won to 210,000 won, a 50% increase, citing strong profitability in the department store's core business and expected improvements in duty-free store performance. The firm maintained its "buy" rating.
Kim Myung-joo, a researcher at Korea Investment & Securities, noted, "Despite the uncertainty surrounding Zinus's performance, the core business continues to deliver solid results. The current valuation is at an attractive level."
The firm anticipates that the profit leverage from Hyundai Department Store's department division will continue this year. In the first quarter, the operating profit of the department store division rose by 39.7% compared to the same period last year, and the operating profit margin based on net sales improved by 5.0 percentage points.
Analysts attribute the improvement in profitability to a high proportion of clothing sales and a decrease in depreciation costs, estimating that the annual reduction in depreciation expenses will amount to approximately 27 billion won.
Improvements in operating profit margins are expected to continue in the second to fourth quarters. The operating profit margin for the department store division is projected to improve by 5.5 percentage points in the second quarter, 4.0 percentage points in the third quarter, and 2.4 percentage points in the fourth quarter compared to the same period last year.
Improvements in the duty-free business are also anticipated. Hyundai Department Store began operating the DF2 area at Incheon Airport on April 28, following the withdrawal of Shinsegae. While the DF2 site is expected to break even or incur slight losses initially, the more profitable DF5 and DF7 sites are expected to offset this, leading to a significant increase in the duty-free division's operating profit from 200 million won last year to 12.5 billion won this year.
Regarding Zinus, which has faced significant market concerns, the potential for further uncertainty is considered limited. While pressures from raw material prices, shipping costs, and intensified competition in the U.S. market remain, efforts to reduce costs through the sale of the Georgia factory and improvements in operational efficiency are underway, and sales of Green Tea mattresses on Amazon in the U.S. have recently shown signs of recovery.
Kim stated, "While the risks related to Zinus have not been completely resolved, even considering this, Hyundai Department Store's current corporate value is undervalued. We expect that as valuation attractiveness becomes more pronounced, the gap in stock prices with other department store companies will narrow."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.