[Click eStock] Emart, Profitability and Stock Price Recovery Expected Next Year

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating and a target price of 130,000 KRW for Emart on the 27th.

Emart's consolidated sales for the fourth quarter are expected to increase by 4.9% year-on-year to 7.1935 trillion KRW. Operating profit is forecasted to decrease by 22.3% to 59.1 billion KRW. Sales are expected to fall short of market expectations by 4.2%, and operating profit by 21.3%. The significant shortfall in operating profit is due to a 20 billion KRW recall cost for Starbucks' Summer Carry Bag, which will also occur in the fourth quarter. Thanks to the effect of the SSG Sale in November, the existing store growth in discount stores for the fourth quarter is expected to be favorable at 7% to 7.3%. Due to a low base and solid existing store growth, the separate operating profit for the fourth quarter is expected to increase by 11.3% year-on-year to 47 billion KRW.

Expectations for the relaxation of mandatory closure regulations for marts are also rising. According to Daegu City, starting next year, the mandatory closure day for large marts will change from Sunday to a weekday. Additionally, the Large and Small-Medium Distribution Win-Win Council plans to announce a win-win plan, mainly focusing on dawn delivery through stores, as early as this year. There have been two major periods of significant decline in the mart industry in the past: the first (2012?2013) was during the period when regulations such as mandatory closures were applied, and the second was during the period of aggressive business expansion by e-commerce companies like Coupang (2018?2019). Myungjoo Kim, a researcher at Korea Investment & Securities, said, “From next year, the negative impact of online market growth on marts will significantly decrease,” adding, “The online market is expected to grow by 8.8% year-on-year next year, while the mart industry is expected to grow by 3.2%.”

Looking at Emart’s stock price this year, it showed a sluggish performance due to large losses in the online platform, decreased operating profit in discount stores from Q1 to Q3 due to increased labor costs, and borrowing burdens caused by rising interest rates. Researcher Myungjoo Kim explained, “Since the high-interest-rate environment will continue, Emart will actively pursue profitability improvement strategies next year,” and added, “We expect a reduction in online platform losses, an increase in discount store operating profit, and a recovery in stock price next year.”

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