[Click eStock] GS Retail, Online Deficit Expected to Shrink... Target Price Up

Korea Investment & Securities forecasted on the 5th that GS Retail's first-quarter net profit will fall short of consensus, but the deficit in the online sector is expected to shrink. Accordingly, they maintained a 'Buy' investment rating and raised the target stock price to 40,000 KRW.

Myungjoo Kim, a researcher at Korea Investment & Securities, stated, "Although the first-quarter convenience store division's sluggish performance led to a 2.9% downward revision of the 2023 net profit, considering the enhanced competitiveness of the convenience store MD and the reduction of online losses, the 2024 net profit has been revised upward by 6.6%."

This year's first-quarter sales are expected to increase by 6.0% year-on-year to 2.7195 trillion KRW, and operating profit is projected to surge 90% to 47.1 billion KRW, both falling short of market expectations by 1.8% and 3.9%, respectively.

Researcher Kim analyzed, "The existing store growth of convenience stores in the first quarter was weaker than market expectations due to the severe cold in January and the increase in overseas travel by domestic consumers in February and March," adding, "The existing store growth in the first quarter is estimated at 0~1% (1.6%~2.6% excluding diagnostic kit sales in the first quarter of 2022)."

Kim also predicted that the deficit in the online business, which drove GS Retail's stock price rise in the second half of last year, will shrink. He estimated, "Through structural improvements such as reducing promotions in the online business, the digital division's deficit this year will decrease by 57 billion KRW compared to the previous year."

He particularly anticipated a recovery in performance starting from the second quarter. Researcher Kim estimated, "From the second quarter, the existing store growth of the convenience store division is expected to recover, and the operating profit margin of the convenience store division in 2023 will improve by 0.3 percentage points compared to the previous year."

He added, "With the arrival of the convenience store peak season in the second quarter, GS Retail's stock price recovery is expected to continue."

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