[Click eStock] "BGF Retail, The Changing Business Environment with With-Corona"

Recent Omicron Cases Seem Not to Significantly Damage Business Conditions
Hyundai Motor Securities Maintains BGF Retail Target Price at 230,000 Won

[Asia Economy Reporter Gong Byung-sun] There are expectations that BGF Retail's future performance will improve due to With Corona, which signifies a gradual return to normal life. The new COVID-19 variant 'Omicron' does not seem to have a significant impact.

On the 9th, Hyundai Motor Securities estimated BGF Retail's Q4 sales this year to be 1.6982 trillion KRW, a 9.1% increase compared to the same period last year, and operating profit to be 44.2 billion KRW, a 24.6% increase over the same period. The respective market consensus figures are 1.6978 trillion KRW and 46.3 billion KRW.

With Corona is expected to have a positive effect on performance. Since last October, social distancing measures have been eased, and the business environment has positively changed with the start of With Corona in November. Although the recently emerged Omicron variant is somewhat burdensome, it is judged not to be severe enough to damage the business conditions.

Operating profit growth rate in Q4 this year is also expected to exceed the growth rate of sales. This means that sales are increasing mainly through high-margin products, leading to continuous improvement in gross profit margin. Park Jong-ryeol, a researcher at Hyundai Motor Securities, said, "Gross profit margin is improving due to strengthened profit and loss standards for stores in special locations and subsidiaries' operations, as well as operational efficiency," adding, "Operating profit margin for Q4 this year is estimated to rise by 0.3 percentage points from the same period last year to 2.6%."

Next year's business conditions depend on whether With Corona is implemented normally. Transitioning to gradual daily recovery will increase foot traffic and restore consumer sentiment, contributing to business improvement. It is also expected that new stores will continue to open steadily next year and that previously underperforming stores in special locations will recover.

Accordingly, Hyundai Motor Securities maintained a 'Buy' investment opinion on BGF Retail with a target price of 230,000 KRW. The closing price on the previous day was 151,000 KRW.