[Click eStock] "Emart, 1Q Operating Profit Expected to Increase by 102%"

[Asia Economy Reporter Ji Yeon-jin] Hanwha Investment & Securities announced on the 5th that it expects Emart's earnings growth to continue in the first quarter of this year and maintains the target stock price at 220,000 KRW.

Emart's total sales in the first quarter are estimated to be 5.9339 trillion KRW, up 13.9% year-on-year, and operating profit is expected to increase by 102.2% to 97.9 billion KRW. Although there was a difference in the timing of the Lunar New Year holiday in January, offline traffic recovery appears to have progressed rapidly due to the social distancing level 2.5, and the contribution to sales has expanded due to growth in home appliances and furniture sales. Additionally, profitability improvement effects from the closure of unprofitable stores, reduction in losses of SSG.COM due to high growth in online food sales, and increased profit contribution from the consolidation of subsidiaries are expected.

From next year, the performance improvement of subsidiaries is anticipated. As the opening of the Chosun Hotel is partially completed, cost burdens are expected to ease, and effects from the restructuring of the Shinsegae Food division and the closure of unprofitable sites, as well as the reduction of losses at Emart24 due to new store openings and recovery of existing stores, are predicted. The handling volume of SSG.COM is also expected to increase due to the rise in stores utilizing the PP center. Growth in T-commerce and Shinsegae I&C is also expected to be maintained.

Furthermore, if SSG.COM's open market is launched, the increase in handling volume is expected to accelerate further. Emart is building competitiveness in the food sector, which results in high consumer loyalty and the potential to attract new customers through product line expansion, enabling the establishment of a comprehensive mall format. For some product categories, an O2O (online-to-offline) strategy linked with Emart stores is also expected to be implemented. Analyst Nam Sung-hyun of Hanwha Investment & Securities stated, "However, the open market model should present a model that utilizes stable capacity in logistics and distribution," adding, "If it is simply a brokerage platform, there will be limitations in leveraging the company's existing competitiveness."