[Click e-Stock] "Emart Expected to Meet Q1 Earnings Expectations... Target Price Raised"

On April 21, IBK Investment & Securities raised its target price for Emart from 104,000 won to 120,000 won, reflecting the company's first-quarter earnings outlook. The brokerage maintained its "buy" investment rating.

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Nam Sung-hyun, analyst at IBK Investment & Securities, stated in a report released the same day, "Recovery in the core business and improved profitability driven by the exclusion of Gmarket Global from consolidation are expected to fuel earnings growth." He added, "Profit increases are likely to be seen due to growth at discount stores and Traders' existing stores, as well as greater profit contribution from Shinsegae Property and favorable market conditions for Chosun Hotel."

Emart's consolidated sales for the first quarter are estimated at 7.6617 trillion won, up 6.1% year-on-year, while operating profit is expected to rise 10.2% to 175.6 billion won. The growth rates for discount stores and Traders' existing stores are projected to be 2.0% and 3.1%, respectively. These results are attributed to the contraction of competitors' store networks and increased customer traffic at Traders.

First-quarter earnings improvement at SCK Company (Starbucks Korea) is not expected to be easy. Sales are estimated at 801 billion won, up 5.1% year-on-year, due to new store openings and growth at existing locations. However, operating profit is likely to decrease, as rising costs and provisions set aside for the recall of frequency promotion gifts in the fourth quarter of last year will weigh on profitability.

Nam concluded, "Emart's earnings growth is expected to continue throughout the year," adding, "Market restructuring in the discount store segment, profitability improvement, and higher operating results from major subsidiaries are anticipated, with profit momentum likely to strengthen in the second half of the year."

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