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TaylorMade issue approaching resolution

4Q25 preview: Favorable weather conditions

For 4Q25, we expect F&F to post revenue of W569.7bn (+4% YoY) and operating profit of W137.1bn (+14% YoY), in line with the consensus. The outdoor apparel brand Discovery typically contributes meaningfully to fourth-quarter earnings. While the brand saw a 20% YoY drop in sales in 1Q-3Q25 (cumulative) due to weakening brand power, we expect the pace of decline to moderate to 9% YoY in 4Q25 on the back of unusually cold weather.

Beyond Discovery, both MLB and the overall China business appear to be tracking closely in line with management’s guidance. The China business delivered a strong performance in 3Q25 (with revenue expanding 14% YoY), serving as a key driver of overall results. In 4Q25, the business appears to be sustaining solid growth.

As the drag from Discovery begins to ease, profitability should recover. OP margin?which had been under pressure since 3Q23, coinciding with the downturn in Discovery revenue?improved in 3Q25 for the first time in nine quarters, likely thanks to a rising mix of high-margin exports. Amid continued export strength and a moderation in Discovery’s sales decline, operating leverage should remain intact in 4Q25.

TaylorMade is an additional upside factor

Potential buyers have reportedly submitted bids in the mid-W4tr range for a controlling stake in TaylorMade. From the outset of its investment in TaylorMade, F&F has considered the possibility of a full acquisition, and we believe the indicated price range is reasonable, suggesting that an acquisition remains a viable scenario. (For reference, Acushnet’s market cap is approximately W7tr.) We estimate this would require funding of roughly W2.5tr. Even if financed entirely through debt, we believe the acquisition would be earnings-accretive, given TaylorMade’s 2024 EBITDA of W320bn (vs. estimated annual interest burden in the W100bn range).

If F&F does not proceed with an acquisition and instead divests its stake, the outcome would still be positive. The company invested a total of W550bn (W200bn in mezzanine financing and W350bn in equity) through an SPC. In the event of a stake sale, close to W2tr in cash proceeds could be realized. Once a preferred bidder is selected, F&F is likely to decide on either an acquisition or divestiture relatively quickly. Assuming the company does choose to acquire TaylorMade and applying the same valuation methodology used for Misto Holdings (operating value + Acushnet value), we estimate F&F’s value at W4.5tr, including W1.3tr from TaylorMade (W4.4tr x 58% stake x 50% discount).