[Click eStock] "Emart, Expanding Competitiveness Amid Competition"

Daishin Securities Report

[Asia Economy Reporter Gong Byung-sun] Daishin Securities raised the target price for Emart from 210,000 KRW to 234,000 KRW on the 19th, citing clear visibility of performance improvement this year. The investment rating was maintained at 'Buy.'

Emart experienced losses in the fourth quarter of last year due to competition among online operators but improved its performance by expanding market dominance. Until the third quarter of last year, the operating loss of Emart's online food specialty platform SSG.com was reduced to 3.1 billion KRW, but due to promotions, it expanded to 10.4 billion KRW in the fourth quarter. However, SSG.com's transaction volume in the fourth quarter grew by 30% compared to the previous quarter, maintaining a high growth trend. The profits and losses of other subsidiaries including SSG.com improved, resulting in a consolidated subsidiary operating profit increase of 34.9 billion KRW compared to the same period last year, successfully turning to a profit.

The recovery of growth rate in existing stores is also a positive factor. Although sales of low-margin home appliances increased and shipments of products from the Picking & Parking (PP) center, where employees directly sort and load onto delivery vehicles, increased, the gross profit margin rose by 80 basis points compared to the same period last year, supported by strong sales growth. The operating loss of specialty stores also significantly decreased from 25.6 billion KRW in the fourth quarter of 2019 to 5.2 billion KRW in the fourth quarter of this year. Analyst Yoo Jeong-hyun of Daishin Securities said, “The total sales of the separate corporation in the fourth quarter of last year were 3.9881 trillion KRW, up 11% year-on-year, and operating profit increased by 233% to 84.4 billion KRW.”

Analyst Yoo explained, “Overall synergy is being created rapidly,” and “the visibility of performance improvement this year is very clear.” He added, “However, continuous monitoring of the intensity of competition with online operators is necessary.”

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