On Monday, Morgan Stanley (NYSE:MS) initiated coverage on Fila Holdings Corp (081660:KS), assigning an Overweight rating to the stock with a price target of KRW 50,000.00.
The firm highlighted the positive impact of the company's rebranding efforts in Korea, particularly noting an improvement in brand preference during the spring/summer season.
The financial institution forecasts a 13% compound annual growth rate (CAGR) in domestic sales from 2023 to 2026, beginning with an anticipated pickup in the 2024 fall/winter season. Fila Holdings' successful rebranding initiatives support this growth projection.
In the United States, Morgan Stanley anticipates a significant reduction in operating losses for Fila Holdings in 2024. This expectation is based on healthier channel and brand inventory levels, as well as the company's self-help efforts, which are believed to contribute to a more stable financial performance.
The firm also estimated total shareholder returns for 2024, including share repurchases, to be around 4.7% at the current share price. This return is considered to provide a cushion against potential downside risks for investors.
The price target of KRW 50,000.00 set by Morgan Stanley is derived from a residual income model and implies a next twelve months (NTM) price-to-earnings (P/E) ratio of 13 times. This is above Fila Holdings' historical average NTM P/E ratio of 11 times, indicating a positive outlook on the stock's value.
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