[Click eStock] BGF Retail, Steady External Growth... Target Price Up

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[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its 'Buy' rating on BGF Retail on the 18th and raised the target price by 2% to 215,000 KRW.

BGF Retail's consolidated sales for the first quarter of this year are expected to be 1.6677 trillion KRW, with an operating profit of 34.1 billion KRW. Sales are in line with market expectations, while operating profit exceeds them by 11%.

This strong performance is understood to be due to the limited negative impact on convenience store customer traffic despite the spread of Omicron. While beverage sales continued steady growth, the effect of price increases in processed foods also contributed to the strong same-store sales. In particular, sales of self-diagnostic kits, which began in late February, are estimated to have pushed the same-store sales growth rate above 6% in March.

Shinae Park, a researcher at KB Securities, analyzed, "Thanks to sales growth centered on high-margin products, the operating profit margin of the convenience store division is expected to improve by 0.6 percentage points compared to the previous year," adding, "The net increase in stores in the first quarter rose by 230 compared to the previous quarter."

Following the strong first-quarter performance, annual results are also expected to continue growing this year. Consolidated sales for this year are projected at 7.302 trillion KRW, and operating profit at 236.1 billion KRW, representing growth of 8% and 18% respectively compared to the previous year. This is due to the easing of social distancing measures, which is expected to increase in-store dining demand at convenience stores, leading to a recovery in food category sales. Additionally, sales growth in school districts is anticipated with the normalization of school attendance.

Researcher Park stated, "Although logistics costs and depreciation expenses are on the rise, the operating profit margin this year is expected to improve by 0.3 percentage points compared to the previous year, supported by solid external growth centered on high-margin products."

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