HHS
The author is an analyst for NH Investment & Securities. He can be reached at jooyh@nhqv.com -- Ed.
We lower our TP on HHS to W60,000. However, considering the value of its cash equivalents and equity holdings, the firm’s EV points to significant undervaluation.
Lower TP to W60,000
We lower our TP for Hyundai Home Shopping (HHS) by 14.3% to W60,000. Our TP is derived by applying a P/E of 7.0x to 12-month forward NP. Although the home shopping industry as a distribution channel has limited growth potential, and the firm’s GMV growth has slowed amid declining consumption, we see excessive undervaluation in the share price, even when considering the tepid performance of the main home-shopping business.
On a non-consolidated basis, HHS has secured over W600bn in cash equivalents and other financial assets, which is more than its market cap. The value of its stakes in Handsome and Hyundai L&C should also be considered in evaluating the firm’s EV. In the future, if new businesses based on the company’s financial strengths or bolstered shareholder return policy are announced, HHS should see a rise in share price momentum.
2Q23 review: Home shopping sluggish; Hyundai L&C improving
HHS reported consolidated 2Q23 GMV of W1,277.6bn (-5% y-y) and OP of W17.7bn (-36% y-y), missing both our estimates and consensus.
At the home shopping division, earnings decline was larger than expected, with OP plunging 70.3% y-y due to languid GMV growth (-2.9% y-y) and cost increase (eg, transmission commissions). In contrast, OP topped forecasts at subsidiary Hyundai L&C, climbing 1,040% y-y. Although sales slid due to demand downturn amid economic slowdown in North America, OP was boosted by raw material price decline. Helped by low-base effect from 2H22, Hyundai L&C should further contribute to HHS’s consolidated earnings rebound in 2H23.