[Click eStock] "Emart, No Issues with Online Growth Direction"

3Q Operating Profit Expected at 125.6 Billion Won... Up 8.1% YoY

[Asia Economy Reporter Minwoo Lee] Emart is expected to post solid results in the third quarter. Analysts say there is no significant change in the major directions such as benefiting from business restructuring and online growth.

On the 29th, Shinhan Financial Investment forecasted that Emart would record consolidated sales of 5.8143 trillion KRW and operating profit of 125.6 billion KRW in the third quarter of this year. This represents an increase of 14.8% and 8.1%, respectively, compared to the same period last year.

Specifically, the existing store growth rate in the mart division was projected at 0.8%. The holiday effect this year was reflected in mid to late September, whereas last year it was reflected from late August to early September, so there is no cumulative difference for the quarter. The existing store effect related to the Online PP Center (online transaction amount shipped from stores) was estimated at 2 percentage points (P).

The online (SSG.com) division, which grew about 50% in the previous quarter, is expected to increase by 33.1% year-on-year in the third quarter as well. Considering that the transaction growth rate in the second half of last year was about 10 percentage points higher than in the first half, this is regarded as a solid growth trend offsetting the base effect. The online operating loss is estimated to have decreased by 6.5 billion KRW compared to the previous quarter and by 16.3 billion KRW compared to the same period last year, totaling 7.2 billion KRW. This is interpreted as a result of reduced costs due to the absence of related TV advertisements.

Solid growth is expected to continue. Heejin Park, a researcher at Shinhan Financial Investment, said, "Since last year, Emart's stock momentum has been driven by mart bottoming, online growth, and consolidated profit improvement. Despite the addition of mart business restructuring and the COVID-19 variable this year, there is no change in direction. Considering recent trends, expectations for further momentum expansion after the fourth quarter remain valid." He added, "The major shareholder change due to the equity donation announced the day before is consistent with the existing management structure, so there is no change in corporate value."

However, there are some additional variables. One is the amendment to the Distribution Coexistence and Development Act, which is scheduled to expire in November. In addition to existing regulations such as mart operating hours, the recent amendment includes regulations on department stores and shopping malls. Researcher Park explained, "While the trend needs to be monitored, if shopping mall regulations are implemented, it seems inevitable that there will be an impact on the earnings of Shinsegae Property, a consolidated subsidiary of the company. Shinsegae Property's operating profit accounts for 8.5% of the consolidated operating profit."

Against this backdrop, Shinhan Financial Investment maintained a 'Buy' rating on Emart and raised the target price by 12.5% to 180,000 KRW. The closing price the previous day was 141,500 KRW.

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