[Click eStock] "Emart, Expecting Earnings Rebound in Second Half"

[Asia Economy Reporter Eunmo Koo] KB Securities analyzed that Emart is expected to see a performance rebound in the second half of the year, making it an opportunity for low-price buying. The investment opinion and target price were maintained at ‘Buy’ and 160,000 KRW, respectively.

In a report on the 20th, Shin-ae Park, a researcher at KB Securities, stated, “As the profit strength of Emart’s core business divisions recovers, the visibility of a trend reversal to earnings growth is increasing,” adding, “In the third quarter, separate operating profit is expected to turn to growth for the first time in 11 quarters, and in the fourth quarter, consolidated operating profit is also expected to turn to growth for the first time in 12 quarters.” Furthermore, from a long-term perspective, the expectation that Emart will gain a dominant market share in the domestic fresh food online market remains valid, recommending a low-price buying approach.

Emart’s consolidated operating profit is estimated to increase by 3% this year and by 69% next year. Researcher Park predicted, “As the same-store sales growth rate of offline discount stores improves to around -1% to 0%, operating profit will decrease by only about 6% annually over the next three years,” and “Traders, Emart24, and specialty stores are showing a structural profit improvement trend, driving overall corporate profit growth.” She also forecasted, “Shinsegae Food and Chosun Hotel are expected to see significant profit growth in 2021 due to a low base effect, and although SSG.com will find it difficult to improve profits in the short term, its sales are expected to grow at an average annual rate of 20% over the next five years.”

For the second quarter of this year, consolidated net sales are estimated at 5.7741 trillion KRW, a 10% increase compared to the same period last year, with an operating loss of 35.2 billion KRW, widening by 5.3 billion KRW. Researcher Park explained, “Offline discount stores’ sales are expected to decline by 1%, with an operating loss of 10.2 billion KRW,” adding, “Although the increase in comprehensive real estate tax is expected to be minimal, the operating profit margin will deteriorate by 0.2 percentage points due to increased commission fees paid to SSG.com.”

She continued, “Traders’ sales and operating profit are expected to grow strongly by 19% and 20%, respectively,” analyzing that “demand for warehouse-type discount stores, which offer price benefits for bulk purchases due to COVID-19, remains robust.” Additionally, specialty stores’ sales are expected to grow by 15%, with an operating loss of 17.9 billion KRW forecasted, and SSG.com’s total sales are expected to grow by 38%, but operating losses of 19.1 billion KRW are anticipated due to increases in labor costs, depreciation, and promotional expenses. Emart24’s sales are expected to increase by 18%, with operating losses slightly reduced by 400 million KRW.”

This content was produced with the assistance of AI translation services.