[Click eStock] "Lotte Hi-Mart, Expected Relatively Strong Performance in Retail Industry"

DB Financial Investment, Investment Opinion 'Buy' and Target Price of 42,000 Won Presented... Closing Price on 28th at 30,150 Won

[Asia Economy Reporter Kum Boryeong] An analysis has emerged expecting relatively strong performance in the distribution industry in the third quarter, focusing on Lotte Hi-Mart.

According to DB Financial Investment on the 29th, Lotte Hi-Mart's third-quarter sales are estimated to increase by 4.7% compared to the previous year despite sluggish seasonal home appliances. Although air conditioner sales are expected to drop nearly 20% year-on-year due to an extended summer rainy season, double-digit growth in large home appliances such as refrigerators, washing machines, dryers, and dishwashers is anticipated due to increased demand for home appliances caused by COVID-19.

Operating profit for the third quarter is estimated at 50.5 billion KRW, a 51.1% increase from the previous year. While the decrease in air conditioner sales and the rise in online sales proportion will slightly lower the GP margin rate, fixed selling and administrative expenses such as rent and labor costs are expected to decline.

Jaeheon Cha, a researcher at DB Financial Investment, stated, "Lotte Hi-Mart plans to focus on performance growth rather than quantitative growth by enhancing its core competitiveness as a home appliance category killer through strengthening product capabilities. They will continue restructuring existing stores with decreased efficiency, such as shop-in-shops, and focus on improving efficiency of existing stores through opening specialized stores." He added, "By specializing in installation-related home appliance businesses, expanding online sales proportion, and investing in logistics centers, they aim to maintain dominance in the home appliance market while simultaneously diversifying products and improving profitability through expanding private brand (PB) proportions."

DB Financial Investment gave Lotte Hi-Mart a 'Buy' investment rating with a target price of 42,000 KRW. The closing price on the 28th was 30,150 KRW. Researcher Cha analyzed, "We positively evaluate Lotte Hi-Mart's mid- to long-term management strategies such as strengthening product capabilities, focusing on specialization as a home appliance specialty store channel, improving efficiency through store restructuring, and expanding private brands. The possibility of mid- to long-term performance improvement is increasing."