[Click eStock] "BGF Retail, Convenience Store Customer Turnaround Is Crucial"... Target Price ↓

Hanwha Investment & Securities maintained a buy rating on BGF Retail on the 7th, stating that a strategy of buying at the bottom while monitoring the turnaround trend in convenience store customer traffic would be effective, although it lowered the target price from the previous 230,000 KRW to 200,000 KRW.

BGF Retail is recording historically low valuation levels. The main reason for the valuation de-rating is attributed to a portfolio adjustment focused on Chinese consumer stocks following the return of Chinese group tourists, which has lowered the preference for the convenience store sector within the retail industry.

Additionally, the increase in capital expenditures (CAPEX) due to the headquarters-lease-centered store opening policy has led to higher costs such as depreciation, resulting in slow profitability improvement in the convenience store standalone business despite a 2.9% year-on-year growth in the second quarter of this year. The operating profit increase on a standalone basis in Q2 was only 1% compared to the same period last year.

Ultimately, the turnaround in convenience store customer traffic is crucial. Jin-Hyeop Lee, a researcher at Hanwha Investment & Securities, explained, "The key indicator for convenience stores and the retail sector is ultimately traffic," adding, "Sales growth can be expected only when traffic is secured."

He continued, "The actual customer traffic growth rate for convenience stores declined by 2.8% year-on-year in July," and said, "This is believed to be influenced by unfavorable weather conditions such as increased rainy days and a decrease in traffic due to the rise in outbound domestic travelers."

Lee also noted, "Weather is a difficult factor to forecast, but the impact of domestic outbound travel is expected to gradually decrease as overseas travel recovery has been in full swing since the second half of last year," adding, "Conversely, the recovery speed of foreign inbound traffic could accelerate positively due to the resumption of Chinese group tourists and inbound recovery."

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