[Click eStock] "Lotte Shopping, Target Price Maintained at 70,000 Won... Positive Asset Revaluation"

Yuanta Securities maintained a target price of 70,000 KRW and a buy rating for Lotte Shopping on the 3rd.

Looking at Lotte Shopping's consolidated balance sheet for Q3 2024, the current total assets amount to 31 trillion KRW, total liabilities are 20 trillion KRW, and the debt ratio is somewhat high at 190%. It is expected that the debt ratio will significantly decrease once asset revaluation is conducted. Through this, both an accounting debt ratio reduction effect and an increase in equity can be anticipated simultaneously. The last asset revaluation was conducted in 2009, and through this revaluation, they aim to increase the value of land assets to expand financial flexibility.

Lotte Shopping is pursuing six core strategies aiming to achieve an operating profit of 800 billion KRW by 2026. The department store segment accounts for more than 90% of total operating profit, with focused investments targeting VIP and premium consumers. Eight major stores generate 70% of EBITDA (earnings before depreciation and amortization), while low-efficiency stores are undergoing restructuring. In the grocery segment, sales are improving due to increased demand for super small-packaged products, and through sourcing integration, the GPM (gross profit margin) has improved from 31% in 2022 to over 34% in 2024. The e-commerce segment operates mainly in luxury goods, fashion, and beauty, collaborating with Ocado to introduce a Retail Media Network (RMN) and build an AI-based logistics system.

They plan to complete six logistics centers by 2028, targeting breakeven in 2029?2030. Consolidated subsidiaries such as Hi-Mart, Home Shopping, and Culture Works are improving profitability through restructuring, with Home Shopping reducing low-profit products to enhance efficiency. This restructuring is expected to continue until 2026.

Although Lotte Shopping's profitability is improving, there are concerns about scale reduction due to declining sales. They expect sales growth through active sales expansion and overseas store expansion after 2026. The overseas business plans to increase profitability particularly through expansion in Southeast Asia, and will establish Singapore Holdings next year as a growth platform for overseas business. Currently, the focus is on improving profitability, and they aim to transform into a retail tech company by expanding overseas business and utilizing IT technology to increase sales as well as reduce costs. Through this, they plan to drive sales growth in new business areas.

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