[Click eStock] "BGF Retail, Benefiting from Reopening and Inflation... Target Price Up"

[Asia Economy Reporter Myunghwan Lee] Daishin Securities announced on the 10th that it maintains a buy rating on BGF Retail and raises the target price by 10% from the previous 204,000 KRW to 224,000 KRW. The reason is that the company is benefiting from the reopening of the economy and rising prices.

The company's sales and operating profit for the first quarter of this year were 1.6922 trillion KRW and 37.8 billion KRW, respectively. These figures represent increases of 13% and 75% compared to the same period last year, significantly exceeding Daishin Securities' estimates and market expectations.

The average growth rate for the first quarter was 2.7% when excluding diagnostic kits. Despite a 1% decrease in traffic compared to the same period last year due to the surge in Omicron cases, the average spending per customer increased by 6%, reflecting the effect of rising prices. Convenience store sales growth reached 13%, and assuming a store increase rate of about 5%, the sales growth rate attributable to diagnostic kits was estimated at approximately 5%. CU, the convenience store operated by BGF Retail, surpassed the industry average sales growth rate of 9%, demonstrating a focus on ready-to-eat meals and alcoholic beverages compared to competitors.

Meanwhile, in the first quarter, stores in special locations, which had been particularly sluggish in sales due to COVID-19, grew by 9.7% compared to the same period last year, positively impacting profitability. Excluding the special demand for diagnostic kits, the actual operating profit increased by 52% year-on-year to 32.8 billion KRW. Considering that the diagnostic kit demand is a one-time event, achieving operating profit far exceeding expectations is encouraging.

Yoo Jung-hyun, a researcher at Daishin Securities, analyzed, "Under the influence of COVID-19, the high proportion of special location stores led to relatively poor performance, but this year, the situation is reversed with a rapid recovery due to reopening. Compared to competitors, online interference is not severe, and the benefits of rising prices are expected to continue."