[Click eStock] "Emart Expected to Benefit from Competitors' Restructuring"

Yuanta Securities Issues 'Buy' Investment Opinion and Sets Target Price at 210,000 Won... Closing Price on 17th at 113,000 Won

E-Mart Gongdeok Branch, Mapo-gu, Seoul (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Bo-ryeong] As Emart is expected to benefit from the full-scale restructuring of large discount stores, Yuanta Securities on the 18th issued a 'Buy' investment rating and a target price of 210,000 KRW for Emart. The closing price on the 17th was 113,000 KRW.

According to Yuanta Securities, Emart showed a sluggish performance last month with a same-store sales growth rate of minus (-) 4.7%. This was due to a temporary demand withdrawal caused by the emergency disaster relief fund. The effect of the emergency disaster relief fund is understood to be gradually decreasing since this month. However, in June, a less favorable calendar effect is expected with three fewer holidays compared to the previous year, resulting in an anticipated same-store sales growth rate of around -6%.

As competitors' restructuring intensifies, it is an opportune time to pay attention to Emart. Jin-hyeop Lee, a researcher at Yuanta Securities, stated, "Lotte Mart plans to close 16 stores within the year, with six stores closing by June. Homeplus is also in the process of closing and selling stores due to liquidity issues caused by poor performance," adding, "The stores targeted for closure by Lotte Mart and Homeplus are expected to be those in competitive areas adjacent to Emart. Given that Lotte Mart and Homeplus have significantly weaker competitiveness compared to Emart, stores adjacent to Emart are highly likely to be targeted for closure."

He continued, "When competitors are located near existing stores, the sales of those existing stores decrease to about 10-20%. Based on this, if competitors restructure 20 stores, the same-store sales growth rate is expected to increase by 1.4 to 2.9 percentage points," and added, "A 1% change in same-store sales growth per quarter results in approximately 10 billion KRW in operating profit variation. Therefore, due to competitors' restructuring, Emart's operating profit could increase by about 57 billion to 114 billion KRW annually."

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