[Click eStock] "BGF Retail, Inflation Defense Stock"

[Asia Economy Reporter Kwon Jaehee] Ebest Investment & Securities maintained a 'Buy' rating on BGF Retail on the 21st, setting a target price of 240,000 KRW.

BGF Retail's consolidated third-quarter sales are estimated at 2.0197 trillion KRW, a 10% increase compared to the same period last year, and operating profit is estimated at 86.3 billion KRW, a 24.2% increase over the same period. These results exceed previous estimates.

It is judged that the impact of rainfall and typhoon-related weather in the third quarter of this year was less than expected.

According to the Ministry of Trade, Industry and Energy, convenience store channel sales increased by 10.4% in July and 12.8% in August, maintaining a favorable trend in both customer traffic and average spending per customer. By product category, it is believed that the substitution of dining-out demand due to inflation has led to a mix improvement effect through growth in fresh foods (FF) and home meal replacements (HMR). Among subsidiaries, BGF Logis experienced a positive business environment due to falling oil prices, and BGF Food is also expected to improve performance due to FF price increases, fully benefiting from the third quarter peak season. Store net additions are also expected to meet the annual target.

Despite concerns about consumption contraction next year due to high inflation and interest rate hikes, the convenience store sector is expected to drive both customer attraction and average spending through ready meals and instant foods. In the second quarter of this year, BGF Retail's HMR sales increased by 16% year-on-year, and fresh food sales increased by 14%. This trend is estimated to have continued into the third quarter. Additionally, BGF Retail is actively opening headquarters-leased stores, which is expected to improve franchise fee rates and secure stores with location advantages, making the outlook positive.

Orin Ah, a researcher at Ebest Investment & Securities, said, "Based on the expected 2023 performance, the current stock price is 13.8 times earnings, and recent price adjustments have partially eased valuation burdens," adding, "Within the distribution sector, convenience stores are considered advantageous for benefiting from inflation and defending against economic slowdown, and BGF Retail is expected to maximize these effects."

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