[Edaily Reporter Shin Ha-yeon ] On the 6th, Shinhan Investment Securities assessed that while ZINUS ( HYUNDAIDEPARTMENTSTORECO.,LTD(069960)) continues to post weak earnings, the competitiveness of its core businesses—such as department stores and duty-free shops—is actually strengthening. Although the firm lowered its target price from 210,000 won to 180,000 won to reflect the decline in sector valuations, it maintained its “Buy” rating.

Cho Sang-hoon, an analyst at Shinhan Investment Securities, stated, “We maintain our view that this is the top pick within the sector,” adding, “The rebound in department store purchasing power, which began in the third quarter due to rising labor income, rising asset prices, and a surge in foreign sales, is expected to continue throughout this year.” He continued, “In the duty-free sector, the new opening of the DF2 zone at Incheon International Airport is expected to boost sales at airport stores and improve buying power, leading to an expansion of operating leverage as downtown stores return to profitability.”

On a consolidated basis, second-quarter revenue totaled 1.0681 trillion won, down 1.1% year-over-year, while operating profit fell 8.7% to 79.3 billion won, falling short of the market consensus by approximately 8%. Analyst Cho explained, “While our core businesses—department stores and duty-free—continued to perform well, ZINUS’s slump persisted,” adding, “Excluding ZINUS’s one-time gain, operating profit decreased by 2.6%.”

The department store business continued to show robust growth. Analyst Cho assessed, “The growth rate of department store transaction volume remained high at 16% (10% in July), driven by large stores such as The Hyundai (31%) and the Trade Center (27%), as well as sales to foreign customers (66%, accounting for 8% of total sales),” adding, “Operating profit increased for the third consecutive quarter due to the leverage effect resulting from the rise in sales.”

Profitability also improved in the duty-free sector. He analyzed, “The launch of operations at Incheon Airport’s DF2 offset the impact of the closure of the Dongdaemun store, and thanks to improved buying power, the business shifted from an operating loss of 1.3 billion won in the second quarter of last year to a profit of 6.2 billion won in the second quarter of this year.” On the other hand, he added, “While ZINUS continued to post an operating loss due to declining sales, the quarterly loss is expected to narrow in the second half of the year thanks to a recovery in sales, increased efficiency in production facilities, and the effect of customs duty refunds.”

Researcher Cho stated, “Although we have lowered the target price to reflect the decline in industry-wide valuations, the 12-month forward price-to-earnings ratio (PER) has fallen to 7x due to the combined effects of slowing growth in the department store sector and concerns over ZINUS’s earnings,” adding, “Now is the time to focus on improving the fundamentals of the core business.”