[Click eStock] "Emart, Limited Further Decline in Stock Price Despite Poor Earnings"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Korea Investment & Securities maintained a 'Buy' rating on Emart on the 28th, with a target price of 175,000 KRW.

Emart's consolidated sales for the second quarter of this year are estimated to reach 6.9492 trillion KRW, an 18.5% increase compared to the same period last year, while operating profit is expected to decrease by 65.8% to 2.6 billion KRW. The reason for the lower operating profit forecast is due to costs associated with the launch of a paid membership and continued competition in the online market, which is expected to worsen the profitability of Emart's online platforms compared to the previous quarter. SSG.com is estimated to record a deficit of 28.3 billion KRW, and Gmarket Global a deficit of 18 billion KRW. Same-store sales growth for Emart in the second quarter is expected to be around 3-4%, reflecting consumer price inflation. The deficit in the separate segment is due to increased comprehensive real estate tax and higher commission costs resulting from increased PP center sales.

Despite lowered expectations for online performance and weak results, the reason for maintaining the 'Buy' rating is the outlook that there will be no further significant decline in the stock price. In the first quarter, Gmarket Global's operating loss and the underwhelming launch of SSG.com's paid membership led to very low expectations for Emart's online platforms. Therefore, even if the e-commerce segment's deficit expands in the second quarter compared to the first, further stock price declines are expected to be limited. The ongoing weakness in online performance appears to be overshadowing the value of Emart's offline channels, and Emart24, having achieved economies of scale, is estimated to record profits again in the second quarter of this year following the previous quarter. Emart plans to renovate 9 stores this year following 18 store renovations last year, with renovated stores currently showing approximately 20% sales growth compared to before renovation.

Kim Myungjoo, a researcher at Korea Investment & Securities, stated, "It is regrettable that the paid membership launched by SSG.com in May did not meet market expectations. However, the disappointment regarding Emart's online platform has already been sufficiently reflected in the stock price, and in the second half of the year, the value of offline segments such as Emart24 and discount stores is expected to be highlighted, leading to a stock price recovery."

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