[Click eStock] "Lotte Shopping Expected to Benefit from Local Economy Improvement... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Yuanta Securities on the 11th raised the target price for Lotte Shopping from the previous 165,000 KRW to 180,000 KRW, expecting strong benefits from a robust consumption improvement cycle and the possibility of regional economic recovery. The investment rating was maintained at 'Buy.'

Researcher Lee Jin-hyeop of Yuanta Securities explained, "The target price upgrade is due to upward revisions in earnings estimates following a strong consumption rebound and an increase in the target price-to-book ratio (PBR). The earnings improvement trend from restructuring effects, combined with a strong consumption rebound and a turnaround in LotteON, will create upside potential for the stock price."

Recently, department stores have strongly turned around due to revenge consumption and improved consumer sentiment following COVID-19. In February, same-store sales growth rebounded by 30-40% year-on-year depending on the company, and during the first weekend of March, when the base was even lower, Lotte Department Store showed a 94% increase, Shinsegae Department Store 95%, and Hyundai Department Store 110% sales growth. Researcher Lee analyzed, "Since these figures exceed 2019 sales, which were unaffected by COVID-19, by about 10-20%, we can infer how strong the turnaround is."

In particular, regional economic improvement is expected to open up earnings upside for Lotte Shopping. Recently, regional real estate prices have been soaring, and improvements in the performance of key regional manufacturing industries are also expected to lead to regional economic recovery. Lee said, "The reason Lotte Department Store's sales have lagged behind competitors so far is that it has a high proportion of small- and medium-sized stores in the provinces with limited luxury brand coverage, unlike competitors centered on large stores with a high proportion of luxury sales that have driven department store performance. If regional economic recovery leads to sales improvement in small- and medium-sized provincial stores, Lotte Shopping's earnings upside could become even greater."

Currently, the sales rebound between metropolitan area stores and regional stores is at a similar level, and since small- and medium-sized provincial stores have a low proportion of sales in low-margin categories such as luxury goods, margin improvement is also expected to be positive.

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