[Click eStock] "BGF Retail, Low Possibility of Further Price Decline... Historic Lowest Valuation"

NH Investment & Securities maintained a buy rating and a target price of 200,000 KRW for BGF Retail on the 3rd, stating that the stock price has fallen to an all-time low valuation level, making further downside potential limited.

Researcher Ju Young-hoon of NH Investment & Securities explained, "The increase in rental expenses arising from the process of raising the proportion of headquarters-leased stores is acting as a burden on short-term profitability. However, since this strategy is meaningful in securing the operational stability of high-sales stores, it should not be evaluated solely based on short-term performance."

He added, "Currently, the stock price is below the historical price-to-earnings ratio (PER) band's lowest level, and the short-term earnings weakness has been largely reflected. As the competitiveness of the convenience store industry, which is at the center of value-for-money consumption, has not changed, we believe the possibility of further stock price decline is low."

BGF Retail's consolidated sales for the third quarter of this year increased by 7% year-on-year to 2.2068 trillion KRW, while operating profit decreased by 5% to 87 billion KRW, slightly missing market consensus estimates.

Researcher Ju stated, "The same-store sales growth rate for the third quarter was 0.9%. Compared to the first half, the same-store sales growth rate declined due to a high base in the previous year and unfavorable weather conditions that reduced outdoor activities, resulting in a challenging business environment."

He also noted, "However, it is positive that ready-to-eat meals, a representative differentiated product of convenience stores, continue to grow, and the average franchise fee rate rose by 0.1 percentage points year-on-year to 34.9%. Contrary to concerns about market saturation, the pace of new store openings is faster than expected, leading us to revise the net store increase target upward by 100 stores from the beginning of the year to 900 stores."

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