[Click eStock] "Lotte Hi-Mart, Burdensome Base Effect"

Q3 Earnings Below Consensus
Hyundai Motor Securities Lowers Lotte Hi-Mart Target Price from 44,000 KRW to 39,000 KRW

[Asia Economy Reporter Gong Byung-sun] Lotte Hi-Mart's third-quarter earnings this year fell short of market expectations (consensus). Since there was a considerable rebound effect from COVID-19 in the second half of last year, the fourth-quarter performance this year is also expected to be somewhat sluggish.

According to Hyundai Motor Securities on the 8th, Lotte Hi-Mart's third-quarter sales this year decreased by 0.7% year-on-year to 1.0403 trillion KRW, and operating profit fell by 9% during the same period to 50.9 billion KRW. These figures are 3.92% and 15.04% below the respective consensus estimates.

The high base effect from last year led to the sluggish results. In the third quarter of last year, favorable factors such as strong air conditioner sales and the premium large home appliance rebate program contributed to a significant increase in sales and operating profit. However, considering the high base effect, Hyundai Motor Securities evaluates the performance as relatively decent.

The base effect is expected to remain a burden in the fourth quarter of this year as well. In the second half of last year, increased time spent at home highlighted home-related consumption, sustaining demand for premium large home appliances, and sales of stay-at-home trend products also showed strong performance.

Although attempts are being made to diversify stores, the average number of stores is expected to decrease, so the sales growth momentum is unlikely to be strong. Following the reduction of 18 stores last year, it is forecasted that 22 stores will be closed this year. In response, Lotte Hi-Mart plans to continue its growth by actively promoting its online shopping mall. The proportion of Lotte Hi-Mart's online sales is expected to expand from 15% last year to 20% this year.

Accordingly, Hyundai Motor Securities maintained its 'Buy' investment rating on Lotte Hi-Mart but lowered the target price from 44,000 KRW to 39,000 KRW. The closing price on the 5th was 27,150 KRW.

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