[Click eStock] "Emart, Focus on Direction Rather Than Short-Term Performance Concerns"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities maintained a 'Buy' rating and a target price of 260,000 KRW for Emart on the 14th, stating that although the third-quarter earnings this year are expected to be sluggish, the short-term earnings downturn has been sufficiently reflected in the stock price.

Joo Younghoon, a researcher at NH Investment & Securities, said, "Although a short-term earnings momentum slowdown is inevitable due to the disaster relief funds, there is no change from the existing view that Emart will achieve record-high operating profit in 2022 through the consolidation effect of Starbucks Coffee Korea as a subsidiary in the fourth quarter."

Emart's third-quarter earnings are estimated at consolidated sales of 6.5554 trillion KRW, up 11% year-on-year, and operating profit of 1.4212 trillion KRW, down 6%. Researcher Joo explained, "The same-store sales growth rates for discount stores and Traders are about 1.6% and 4.6%, respectively. Operating performance in July and August was favorable, but a somewhat disappointing result is expected due to a sales decline in September caused by the disaster relief fund payments." The transaction growth rate of SSG.com is expected to slightly miss the previous target of 30% growth year-on-year, coming in at 27.6%. Researcher Joo said, "Similar to offline stores, online grocery shopping demand decreased in September due to the impact of the disaster relief funds. However, since the 'SSG Day' event is scheduled for the end of October, there should be no problem achieving the overall second-half target."

From the fourth quarter, a rapid recovery is expected. Researcher Joo said, "The negative sales impact of the disaster relief funds was confirmed to have disappeared by mid-October. Through the expanded contribution of same-store sales growth due to the PP center expansion and the effect of launching a paid membership for SSG.com, rapid sales recovery is expected from the fourth quarter. We believe the short-term earnings slowdown has already been sufficiently reflected in the stock price, and the stock price will rebound."