HDS: Earnings to Arrive Solid

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The author is an analyst of NH Investment & Securities. He can be reached at jooyh@nhqv.com. — Ed.

Undaunted by stricter social distancing rules, HDS is predicted to announce consensus-meeting earnings for 4Q21. Accordingly, we advise loading up on its shares rather than being caught up in vague concerns.

Focus on earnings

We reiterate our Buy rating for Hyundai Department Store (HDS), with a TP of W105,000.

Amid a resurgence of Covid-19, the government has announced stricter social distancing rules, limiting social gatherings to four persons and putting a brake on its policy (that had begun on Nov 1) to return to pre-pandemic lives. These rules might spark some concerns towards HDS’s department store and DFS businesses.

In our view, however, HDS’s 4Q21 earnings are unlikely to miss consensus, given that the tightened rules are to affect the firm’s 4Q21 earnings for only two weeks and to have virtually no impact upon its DFS domain, which has a wholesale-focused business structure. Accordingly, we maintain HDS among our retail sector top picks.

Both department store and DFS businesses faring well in 4Q21

For 4Q21, we expect HDS to post gross sales of W2,631.5bn (+25.8% y-y) and OP of W104.1bn (+52.8% y-y).

For the department store division, we estimate 4Q21 SSSG of 11% y-y, gross sales of W1,913.9bn (+21.1% y-y), and OP of W109.7bn (+34.1% y-y). Backed by a recovery in apparel sales as well as luxury brand sales, earnings over October~November proved higher than expected. Given y-y low-base effects, SSSG is likely to come in above 20% y-y in December.

The DFS division should report 4Q21 gross sales of W717.6bn (+40.2% y-y), with operating losses narrowing y-y to W5.6bn. With daily average sales staying at the mid-W8bn level and no particular cost issues in sight, the division is to see steep q-q and y-y improvements in its operating figures. Given that rent discount for the airport DFS has extended by six months, the DFS business is highly likely in Jan 2022 to reach its monthly BEP for the first time.


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