[Click eStock] "GS Retail, Convenience Store Market Recovery from Q4... Sufficient Investment Appeal"

[Asia Economy Reporter Park Jihwan] Daishin Securities evaluated GS Retail on the 8th, stating that the convenience store industry is expected to show a clear recovery starting from the 4th quarter of this year, making it a sufficiently attractive time for investment. They maintained a 'Buy' investment rating and a target price of 46,000 KRW.

Yoo Jeonghyun, a researcher at Daishin Securities, said, "Operating profit increased by 30% year-on-year due to the inclusion of home shopping consolidation in the 3rd quarter," adding, "Total sales and operating profit were 2.7425 trillion KRW and 102.5 billion KRW, respectively, representing increases of 16% and 30% compared to a year ago." He explained that operating profit entered a growth phase from the 3rd quarter due to the home shopping consolidation effect. However, excluding the home shopping effect, operating profit decreased by 6%.

Convenience stores experienced sluggish same-store sales growth in July and August due to reduced outdoor activities caused by the Delta variant, but sales have been recovering since September thanks to favorable weather and an increase in outdoor activity population. Accordingly, the overall average same-store sales growth rate for the 3rd quarter is expected to be similar to that of the previous year.

In the supermarket sector, although there was an increase in demand for dining in due to the spread of the Delta variant in July, sales and operating profit slightly declined due to the combined effect of supermarkets being excluded from the disaster relief fund usage in September. Home shopping saw a decline in transaction growth rate due to the timing difference of Chuseok and intensified competition in the mobile channel, leading to a slowdown in TV channel transaction growth.

Investment strategies considering the possibility of convenience store industry recovery from the 4th quarter are deemed appropriate. Researcher Yoo Jeonghyun analyzed, "With the rise in vaccination rates, the transition to a 'With Corona' system began from the 4th quarter," and "Convenience store traffic is expected to recover gradually."

He stated, "Although the weakening competitiveness of the supermarket and home shopping divisions remains a challenge to be addressed, considering that the convenience store sector, which accounts for the largest portion of profits and losses, is expected to recover, the investment attractiveness at this point is sufficient."