[Click eStock] "Emart, No Problem with High Base in Second Half"

[Asia Economy Reporter Song Hwajeong] Yuanta Securities maintained a 'Buy' rating and a target price of 280,000 KRW for Emart on the 14th, despite concerns over a high base effect in the second half of the year, expecting that earnings will offset these concerns.

Emart posted results in the first quarter that exceeded market expectations (consensus). On a consolidated basis, first-quarter sales reached 5.8958 trillion KRW, and operating profit was 123.2 billion KRW. These figures represent increases of 13.1% and 154.4%, respectively, compared to the same period last year. Jinhyup Lee, a researcher at Yuanta Securities, evaluated, "The results surpassing the consensus (111.7 billion KRW) clearly indicate a gradual strengthening in the rebound of existing store growth rates at discount stores." On a separate basis, total sales increased by 10.8% year-on-year to 4.1972 trillion KRW, and operating profit rose by 32.2% to 113 billion KRW. The existing store growth rate at discount stores was 7.9%, higher than 2.7% in Q3 and 6.4% in Q4 of last year.

Although there are concerns about a high base in the second half and a slowdown in growth at SSG.com, it is expected that earnings will dispel these worries. Lee said, "The range of Emart's existing store growth rate is increasing over time," adding, "Considering that April included two holidays, achieving nearly 10% growth means that the existing store growth rate in the second half of last year does not feel particularly burdensome." Regarding SSG.com, efforts such as transitioning to an open market, strengthening W Concept, and enhancing department store e-commerce are expected to partially offset the slowdown in food growth with a rebound in non-food gross merchandise volume (GMV).

Lee also stated, "Although there is short-term uncertainty due to the potential acquisition of eBay Korea or mergers and acquisitions (M&A), Emart will announce results that can alleviate market concerns," and added, "The current stock price corresponds to a 12-month forward price-to-earnings ratio (PER) of only about 11 times, making a low-price buying strategy valid."