[Click eStock] "Lotte Shopping, Direction for Earnings Improvement Remains Valid... Target Price Down"

[Asia Economy Reporter Song Hwajeong] Yuanta Securities downgraded the target price of Lotte Shopping from 180,000 KRW to 170,000 KRW on the 11th, stating that although the short-term earnings slump is disappointing, the direction for earnings improvement remains valid. The investment opinion was maintained as 'Buy.'

Lotte Shopping's first-quarter earnings fell significantly short of market expectations (consensus) and were sluggish. In the first quarter, Lotte Shopping recorded sales of 3.88 trillion KRW, down 4.8% year-on-year, and operating profit of 61.8 billion KRW, up 18.5%. The operating profit fell far short of the consensus of 137.7 billion KRW. Researcher Lee Jin-hyeop of Yuanta Securities analyzed, "Even considering one-time costs (51.7 billion KRW), the results fell short of market expectations," adding, "In particular, the weakness in discount stores is disappointing. Last year, due to restructuring effects, despite sluggish growth in existing stores, operating profit improved by 10 to 20 billion KRW compared to the same period last year, but this was not seen this quarter."

Although the first-quarter earnings slump is disappointing, the investment points remain valid. Researcher Lee said, "Since the business conditions were rapidly improving, the first-quarter earnings slump is indeed more disappointing," adding, "However, the earnings improvement of regional hub industries due to entering the economic recovery cycle is clearly appearing, and consumption improvement due to the rebound in regional real estate prices is also emerging, leading to a rebound in Lotte Shopping’s regional department stores, so the investment points remain valid."

The rebound in Lotte ON's total transaction amount (GMV) is also meaningful. The researcher said, "The GMV growth rate in April is estimated to have recorded 14% year-on-year, and if May enters a period where the base becomes significantly lower, the rebound could be even greater," adding, "This will clearly differentiate from competitors whose GMV growth rates are slowing due to a higher base."

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