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Turnaround potential coming into view

Sharp inventory reduction in the Misto business

Misto Holdings’ cumulative 1Q-3Q25 revenue was roughly flat YoY, while operating profit increased 20% YoY. We believe these results show that the company is laying the groundwork for a turnaround. Strong results at Acushnet have contributed to the improvement, with 1Q-3Q25 revenue and operating profit up 8% and 5% YoY respectively (operating profit: +W21.7bn YoY). However, the more significant driver has been improved efficiency within the Misto division; for 1Q-3Q25, the division saw an 11% YoY decline in revenue, but operating profit turned positive (+W57.9bn YoY).

In the Misto division, efficiency gains are materializing thanks to the restructuring of the US business. The company previously announced plans to significantly reorganize/downsize its US business by the end of 2025, including through workforce reductions and restrictions on new orders. As a result, cumulative net losses in the US appear to have shrunk to around W40bn in 1Q-3Q25 (from over W100bn in 2024).

In 3Q25, the US business appears to have recorded a slightly wider loss QoQ due to aggressive price markdowns during the final stage of restructuring. However, this has allowed the company to clear nearly all remaining US inventory (with only minimal stock remaining in Mexico). From 4Q25, the business is operating with minimal staffing and inventory. Looking to 2026, the strength of the turnaround should hinge on the level of normalized/underlying earnings after restructuring costs are removed.

Reasonable entry point

Although revenue growth in the Misto division remains slow and the company continues to depend heavily on Acushnet for overall earnings, we believe these drawbacks are offset by rebounding domestic retail/apparel market conditions, improving investor sentiment, and the company’s attractive shareholder returns. We estimate full-year dividend yield at around 4% (including 2% from an estimated year-end dividend of W900), and treasury stock accounted for 8.8% of issued shares at end-3Q25.

We raise our target price on Misto Holdings to W55,000 (from W47,000), reflecting upward revisions to our earnings forecasts and a higher valuation of its equity stake in Acushnet. The stock is currently trading at a 12-month forward P/E of 10x. We maintain our Buy rating.