Brokerages have collectively raised their target prices for Hyundai Department Store (069960.KS), citing that its core businesses, including department stores and duty-free operations, continue to show solid performance despite weakness at its subsidiary Zinus.
According to the financial investment industry on Friday, Heungkuk Securities, Shinhan Securities and NH Investment & Securities raised their target price for Hyundai Department Store to 140,000 won. Kyobo Securities set a higher target of 150,000 won.
These brokerages assessed that while a decline in first-half operating profit is unavoidable due to Zinus swinging to a loss, the company could return to profit growth in the second half on the strength of its department store and duty-free operations. Hyundai Department Store's first-quarter consolidated revenue came in at 950.1 billion won ($690 million), with operating profit of 98.8 billion won ($72 million), down 13.5% and 12.1% from a year earlier, respectively. The decline was largely attributed to Zinus's deteriorating performance.
Zinus posted a sharp drop in revenue and swung to an operating loss, hit by slowing U.S. consumer spending and price increases stemming from U.S. tariffs. In contrast, the department store division is showing growth, led by luxury goods and fashion. First-quarter revenue rose 7.4% year-on-year to 632.5 billion won ($459 million), while operating profit jumped 39.7% to 135.8 billion won ($99 million).
Rising spending by foreign visitors and increased high-end consumption driven by the recovery in asset markets are cited as the key drivers lifting department store earnings. Analysts also see the valuation as still attractive. NH Investment & Securities noted that "Hyundai Department Store's price-to-earnings ratio (PER) stands at just 10.2 times, indicating it is undervalued." Heungkuk Securities likewise said there is ample room for further share-price re-rating, given the company's strengthened shareholder return policy and improving earnings trajectory.
Brokerages believe the earnings burden from Zinus may persist in the short term but is likely to ease heading into the second half. As a result, they expect continued earnings growth centered on the department store and duty-free businesses to support a sustained rise in the share price.
