[Click eStock] "Emart, Slow Recovery in the Mart Industry... Target Price Down"

Korea Investment & Securities lowered the target price of Emart from 130,000 won to 115,000 won on the 24th, considering the slow recovery of the mart industry. The investment rating was maintained as 'Buy.'

[Image source=Yonhap News]

Myungjoo Kim, a researcher at Korea Investment & Securities, explained, "We lowered the net profit forecasts for this year and next year by 18.1% and 8.4%, respectively, considering the slow recovery of the mart industry."

It is expected that Emart's operating loss in the second quarter of this year will be larger than market expectations. Researcher Kim said, "Emart's consolidated sales in the second quarter are expected to increase by 0.7% year-on-year to 7.1982 trillion won, and the operating loss will widen to 18.9 billion won. Sales are in line with market expectations, but the operating loss will be larger than the market expectation of 16.8 billion won."

The discount store segment is estimated to record an operating loss of 26.5 billion won due to sales losses from the renewal of major stores and slow recovery of customer traffic. The online business division is expected to have reduced its operating loss to 24.1 billion won. Emart has been making efforts since this year to reduce losses in the online business division to improve overall profitability. The major subsidiary Starbucks is expected to have an operating profit margin of 5.0%, down 2.1% year-on-year due to cost pressures such as rising coffee bean prices, similar to the first quarter.

Regarding the slower-than-expected recovery of same-store sales growth in discount stores, Researcher Kim estimated, "It is due to increased dining-out demand following the reopening of economic activities and normalization of overseas travel," adding, "The rapid normalization of external activity demand such as travel, which had been suppressed for the past three years, is negatively impacting mart industry sales."

There is an opinion that a full-scale stock price recovery is expected in the second half of the year. Researcher Kim said, "Since the full-scale resumption of overseas travel by domestic residents began in April, considering the base effect, the mart industry conditions in the second half are likely to improve compared to the first half," and added, "We judge that there will be no additional negative factors for the discount store industry in the second half, and Emart's stock price will also show a recovery trend."

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