[Click eStock] "BGF Retail, Within Sight of Earnings Recovery"

KB Securities Report

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] KB Securities on the 10th raised the target price for BGF Retail from 180,000 KRW to 200,000 KRW, expecting its performance to recover this year based on improved business conditions and base effects. The investment opinion was maintained as 'Buy.'

BGF Retail is expected to show the highest sales growth rate in four years this year, driven by aggressive store expansion. Last year, 1,046 stores were added net, and it is estimated that 950 stores will increase this year. Additionally, with the normalization of school attendance since March, the base effect caused by COVID-19 is also expected to positively impact the sales growth rate. From mid-November last year, social distancing measures were strengthened, causing sales at stores in special locations such as schools, hospitals, and tourist spots to decline by 22%.

The operating profit margin is also expected to improve by 0.8 percentage points this year. Shin-ae Park, an analyst at KB Securities, explained, "The increase in the proportion of food products and the reduction of rental expenses will help improve the operating profit margin." BGF Retail stated that it has set a goal to reduce rental expenses by 10 billion KRW this year.

BGF Retail's market share is also expected to rise. Convenience stores stand out as a startup item with sales stability, and steady startup demand is expected to continue this year. Analyst Park analyzed, "The top two companies, BGF Retail and GS Retail, have competitive advantages in their ability to provide mutual support funds, location, and product assortment that fits trends."

Analyst Park added, "This year, BGF Retail's consolidated sales are expected to increase by 8% year-on-year to 6.669 trillion KRW, and operating profit is expected to rise by 38% year-on-year to 223.7 billion KRW," adding, "Based on store expansion, base effects, and market share growth, there will be a meaningful profit improvement trend this year."