[Edaily Reporter Kim Kyung-eun ] On the 8th, Shinhan Investment Securities raised its target price for Shinsegae Co.,Ltd(004170)by 19%, from 700,000 won to 830,000 won, citing strong performance in the department store segment and the duty-free business returning to profitability. The firm also maintained its “Buy” investment rating and its status as the top pick in the sector.

Cho Sang-hoon, an analyst at Shinhan Investment Securities, stated in a report released that day, “The strong purchasing power in department stores, which began in the third quarter of last year, is expected to continue throughout this year, driven by the government’s expansionary fiscal policy, rising labor income, rising asset prices, and a surge in sales to foreign customers.”

Analyst Cho added, “The company stands out in terms of revenue growth thanks to the renovation of large stores and a higher proportion of luxury goods sales compared to competitors,” noting, “Significant operating leverage is expected due to easing competition among downtown duty-free stores and a reduction in losses at airport locations (following the withdrawal from Incheon Airport’s DF2).”

He continued, “Although the 12-month forward price-to-earnings ratio (PER) has risen to around 14 times due to the recent stock price increase, this is fully justifiable given the higher sales growth rate and strengthened shareholder return policies,” and assessed that “the increased focus on asset value resulting from the redevelopment of the Express Bus Terminal site is also a factor contributing to a revaluation of the company.”

Shinsegae Co.,Ltd’s consolidated revenue for the second quarter of this year is estimated at 1.7896 trillion won, with operating profit at 155.6 billion won—representing year-over-year increases of 5.7% and 106.5%, respectively. This is approximately 5% above the market consensus.

The department store division is expected to drive performance, with total sales growth of 27%. With sales at the flagship store increasing by about 70% and the share of sales to foreign customers expanding to 8.2%, all product categories—including luxury goods and fashion—are expected to continue double-digit growth. Despite an increase in depreciation expenses due to large-scale renovation investments, operating profit is projected to rise for the third consecutive quarter, driven by the operating leverage effect resulting from sales growth.

The firm also anticipated continued improvement in the performance of its subsidiaries. SHINSEGAE INTERNATIONAL is expected to return to profitability, driven by strong performance in its overseas fashion business, while Shinsegae Duty Free is projected to turn its operating profit from a 1.5 billion won loss in the second quarter of last year to a 20.2 billion won profit in the second quarter of this year. This turnaround is attributed to a reduction in losses at its airport store following its withdrawal from Incheon Airport’s Zone 2 (DF2) and an easing of discount competition among downtown duty-free stores.