[E-Daily kyoungeun kim Reporter] iM Securities announced that it is initiating coverage of Shinsegae Co.,Ltd(004170)—which is expected to be the biggest beneficiary of strong inbound consumer spending—by issuing a “Buy” rating and a new target price of 680,000 won. This represents a potential upside of 71.5% relative to the current stock price (396,500 won).
Jang Ho, an analyst at iM Securities, stated in a report released today, “We forecast this year’s operating profit to reach 822.1 billion won, a 71.3% increase year-over-year,” adding, “We expect strong earnings growth in the department store segment.”
The firm explained that it focused on the impact of high-end spending driven by store size and location, as strong inbound consumer spending has been concentrated around the flagship store.
The target price was calculated by applying a target price-to-earnings ratio (PER) of 14.1 times to the 12-month earnings per share. This corresponds to the average PER of Japan’s four major department store chains.
Shinsegae Co.,Ltd’s regional foothold in Myeong-dong is drawing attention amid a recent surge in tourist spending and the number of visitors to South Korea. In the second quarter, tourism spending averaged 2.1 trillion won per month, a 59.6% increase compared to the same period last year. This improvement is attributed to favorable exchange rates, higher per-capita spending, and an increase in the number of visitors to South Korea; the outlook suggests that, in the medium to long term, the rising number of visitors will drive structural growth in inbound tourism.
He said, “As tourism trends shift toward ‘experiences,’ the spread of K-culture is acting as a catalyst for visits to Korea,” adding, “Department stores, as key hubs for K-shopping, are major consumption channels absorbing the expansion of inbound spending.”
He projected, “Net sales from foreign customers at the main store are expected to rise 94.8% year-over-year this year, contributing significantly to the department store’s overall growth.” Shinsegae Co.,Ltd.’s main store has been reborn as a store specialized in luxury consumption following a luxury renovation completed earlier this year, and analysts note that establishing mega-stores in areas with mature foot traffic will enable sales leverage at existing locations.
Recently, large-scale performance bonuses were distributed to employees of the top two companies in the semiconductor industry, and it is believed that the resulting income effect could serve as another catalyst for expanding high-end consumption among domestic consumers. He emphasized that attention should also be paid to the possibility that these benefits will be concentrated at the “South City” store.