[Click eStock] "Lotte Hi-Mart's Performance to Improve Significantly Next Year... Target Price Up"

Heungkuk Securities on the 5th raised the target price for Lotte Hi-Mart to 14,000 KRW, stating, "Although the overall business environment will remain negative next year, the effects of intensive restructuring over the past three years combined with mid- to long-term core strategies will enable a full-scale performance improvement next year." The buy rating was also maintained.

On the same day, Park Jong-ryeol, a researcher at Heungkuk Securities, said, "The standalone sales for the fourth quarter were 625.7 billion KRW, down 14.8% compared to last year, but operating profit turned positive to 6.9 billion KRW compared to the same period last year. The recovery trend in performance is expected to continue following the previous quarter."

He added, "Despite the low base effect from last year, the home appliance market recession is prolonged. With continued store closures, a significant decline in scale is inevitable," but analyzed, "Through efforts to stabilize inventory assets and expand the proportion of high-margin product groups, the gross profit margin improved by 2.6 percentage points to 24.3% compared to the same period last year, and with cost control efforts reducing fixed cost burdens, the expected operating profit margin of 1.1% will enable a return to profitability."

Considering the real estate market downturn, high interest rates, high inflation, and weakened consumer sentiment, it is difficult to expect a clear turnaround in the business environment next year. However, the performance slump that has continued since the second quarter of 2021 is expected to end in the fourth quarter of this year, and a performance turnaround is expected to begin in earnest next year. Researcher Park said, "Next year's annual sales are revised to increase by 4% to 2.8 trillion KRW compared to this year, and operating profit is expected to increase by 90.2% to 47.7 billion KRW compared to this year," adding, "Lotte Hi-Mart is expected to find a breakthrough through mid- to long-term strategies. The store reduction that has been ongoing will conclude this year, and slight new store openings are planned from next year."

He continued, "The mid- to long-term core strategies include redesigning the offline network (strengthening existing store capabilities), home total care services (appliance cleaning, home cleaning, extended warranty insurance, relocation installation, repairs, etc.), enhancing selection diversity through private brand development, and restructuring e-commerce into a differentiated, customer experience-based business," adding, "Since the second quarter of this year, momentum for improving operating performance has appeared, and this trend will strengthen further. With a full-scale performance turnaround next year, a stock price revaluation will also be possible."

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