No Significant Spillover from Coupang, but "Emart's Stock Expected to Recover After Earnings Release" [Click e-Stock]

Korea Investment & Securities announced on April 16 that it has raised its target price for Emart from 115,000 won to 135,000 won, anticipating a recovery in the stock price following the company's first-quarter earnings release this year. The investment opinion remains "Buy."

Myungjoo Kim, an analyst at Korea Investment & Securities, stated, "Although Emart's supply-demand position within the sector will likely remain weak for the time being, improvements in the retail industry such as a recovering birth rate and Emart's attractive valuation suggest that the stock price will show a full-fledged recovery after the first-quarter results. We recommend viewing the recent short-term stock price weakness as a buying opportunity."

Emart's first-quarter results are expected to meet market expectations. Kim forecasted, "Emart's consolidated revenue for the first quarter is expected to reach 7.2209 trillion won, similar to the same period last year, while operating profit is projected to rise 9.1% to 173.8 billion won, which should be in line with market consensus. Although SSG.com continues to underperform and Starbucks will recognize one-off costs, strong standalone performance will help the consolidated results meet expectations."

The same-store sales growth rate was 2% year-on-year, the same as in the fourth quarter of last year. Kim noted, "A positive point is that the gross profit margin (GPM) for discount stores improved by 0.1 percentage points year-on-year, and standalone operating profit grew 9.4% to 145.9 billion won, which is strong. Contrary to expectations, both online and offline channels did not see significant spillover effects from Coupang, and SSG.com's operating loss in the first quarter is expected to have increased to 23 billion won."

So far this year, Emart's stock price has underperformed both the market and other retail companies. Kim explained, "Emart's supply-demand position within the sector has been weak because department store channels have shown overwhelming sales momentum. Although Emart has benefited from Homeplus store closures, which began in earnest last December, this was not enough to keep pace with strong same-store sales growth at department stores. Given that department stores continue to post robust sales this month, Emart's relative supply-demand weakness is likely to persist for the time being."

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