Youngone gains growth from new customers including Alo; target price set at KRW 105,000

[Financial News] NH Investment & Securities assessed that Youngone is maintaining its competitiveness in the original equipment manufacturing (OEM) business by securing new customers, including global athleisure brand Alo. The brokerage maintained its Buy recommendation but lowered its target price from KRW 120,000 to KRW 105,000.
Jeong Ji-yoon, a researcher at NH Investment & Securities, said in a report on the first that "Youngone's stock also fell in tandem with a sharp appreciation of the won in September because the company relies on overseas orders, but there is no problem with its fundamentals."
OEM revenue rose 12% year on year in dollar terms in the first half of this year. Revenue in won from other customers, excluding the four major customers, also increased by 19%.
Jeong explained that "On's apparel business is developing into a new growth engine, while Alo is also leading the global athleisure trend," adding, "Shipments of Alo products such as hoodies and pants from the Nam Dinh and Bac Giang factories in Vietnam to the United States are increasing."
NH Investment & Securities forecast Youngone's consolidated third-quarter revenue at KRW 1.2872 trillion, up 7% year on year, and operating profit at KRW 197.0 billion, up 9%. Both figures are below market forecasts of KRW 1.35 trillion in revenue and KRW 212.0 billion in operating profit.
Jeong noted that "the expected third-quarter results falling short of market expectations is largely attributable to adjustments in the average quarterly exchange rate." OEM revenue is estimated at KRW 900.4 billion, up 9%, while operating profit is projected to rise 4% to KRW 202.1 billion. The operating margin is expected to fall 1.2 percentage points year on year to 22.4%. Despite the high base, dollar-denominated revenue is projected to increase by 6%. With OEM inventories at the end of the second quarter reaching a record KRW 820.6 billion, up 21% year on year, a solid revenue trend is expected to continue.
Third-quarter revenue for bicycle brand Scott was estimated at KRW 338.0 billion, up 2%, while its operating loss was projected at KRW 9.5 billion. Scott's inventories fell 18% year on year to KRW 505.7 billion, which is expected to narrow the loss compared with the previous quarter.
The target price cut reflects lower earnings estimates resulting from an adjustment in the won-dollar exchange rate, not a change in the outlook for dollar-denominated orders. NH Investment & Securities applied a target price-to-earnings ratio of nine times to its forecast 2027 earnings per share.
Jeong said, "Youngone plans to raise its payout ratio to 30% in 2026 and 2027 and repurchase KRW 50.0 billion worth of its own shares by 2027," adding, "The stock is expected to bottom out in the second half of this year, and any further correction could present a medium- to long-term buying opportunity."

[email protected] Lee Jeong-hwa Reporter