[Click eStock] "GS Retail, Earnings Turnaround from Q2... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Hyundai Motor Securities on the 14th raised the target price for GS Retail from 47,000 KRW to 53,000 KRW, stating that although poor performance in the first quarter is inevitable, favorable performance momentum is expected from the second quarter. The investment opinion was set to 'Buy.'

Park Jongryeol, a researcher at Hyundai Motor Securities, said, "The first quarter is inevitably weak due to last year's one-time gains," adding, "This year, improvement in convenience stores and supermarkets is possible, while reducing losses in the hotel and common and other sectors will be key."

First-quarter performance is expected to be weak. Hyundai Motor Securities estimated GS Retail's consolidated first-quarter results at sales of 2.1979 trillion KRW and operating profit of 48.2 billion KRW, representing decreases of 4% and 45.7%, respectively, compared to the same period last year. Researcher Park said, "There was a one-time gain of 37.3 billion KRW from real estate development business in the first quarter of last year," adding, "Excluding this, performance is estimated to be favorable." The convenience store sector is expected to recover from last year's slump with net store increases and a slight recovery in same-store sales growth. Despite a significant decrease in sales due to the closure of underperforming stores, the supermarket sector is expected to show a stable operating profit margin due to improvements in gross profit margin from headquarters-centered chain operation stabilization and reductions in selling and administrative expenses. The hotel sector is expected to continue losses due to the direct impact of COVID-19, including an overall decline in occupancy rates, poor food and banquet sales, and increased fixed costs.

Although earnings decline is inevitable until the first quarter, performance momentum is expected to recover from the second quarter. Researcher Park predicted, "A turnaround in performance centered on convenience stores and supermarkets is possible," and "Losses in the hotel and common and other sectors will gradually decrease." Considering favorable performance trends from the second quarter, Hyundai Motor Securities revised GS Retail's annual sales and operating profit upward by 0.9% and 10.6%, respectively, compared to previous forecasts.