[Click eStock] "BGF Retail Continues Strong Performance in Q4"

[Asia Economy Reporter Park Jihwan] Hyundai Motor Securities on the 13th BGF Retail forecasted that despite the strengthening of social distancing measures due to the spread of the Delta variant, favorable operating results are expected in the third quarter. They maintained a 'Buy' investment rating and a target price of 230,000 KRW, citing positive factors such as continuous new store openings and product mix improvements.

Park Jongryeol, a researcher at Hyundai Motor Securities, emphasized, "In the fourth quarter, the transition to With Corona is expected to positively affect the convenience store industry," adding, "The COVID-19 coexistence national support fund payment will also act as a positive factor for the convenience store sector." The consolidated sales for the third quarter are expected to be 1.8291 trillion KRW, an 8.7% increase year-on-year, and operating profit is expected to rise 17.6% to 74.8 billion KRW.

Since mid-July, social distancing measures have been strengthened, which may somewhat slow the sales growth rate compared to the previous quarter, but convenience stores are expected to record relatively steady growth compared to other distribution channels. Last week’s payment of the COVID-19 coexistence national support fund is also analyzed to positively impact convenience store sales. Researcher Park Jongryeol stated, "The operating profit growth rate will exceed the top-line growth rate," explaining, "This is due to the continued improvement in gross profit margin from a product mix focused on high-margin items, along with strengthened profit and loss standards and operational efficiency for stores in special locations and subsidiaries." The operating profit margin is expected to improve by 0.3 percentage points year-on-year to 4.1%.

The trend of performance improvement is expected to strengthen further in the fourth quarter. Consolidated sales for the fourth quarter are expected to be 1.6982 trillion KRW, up 9.1% year-on-year, and operating profit is expected to increase by 43.4% to 50.9 billion KRW. He said, "With a decrease in the proportion of tobacco sales and growth in high-margin categories, profitability will improve due to product mix enhancements, leading to a steeper improvement in fourth-quarter performance," adding, "Considering the solid third-quarter results and the further strengthened performance momentum in the fourth quarter, there is ample potential for additional stock price revaluation."