[Click eStock] "BGF Retail, Reopening Continues Even When It Rains... Strong Profit Resilience"

[Asia Economy Reporter Myunghwan Lee] Korea Investment & Securities announced on the 19th that it maintains a buy rating and a target price of 235,000 KRW for BGF Retail. The firm also provided an analysis that the company's third-quarter earnings this year are expected to meet market expectations.

Korea Investment & Securities projects BGF Retail's third-quarter sales this year to increase by 12% year-on-year to 2.0497 trillion KRW, and operating profit to rise by 21% to 84.1 billion KRW. These figures align with market forecasts. Same-store sales growth in the third quarter is expected to slightly slow to around 4.5?5.0%, compared to 5.5% in the second quarter. The reason for the slowdown in same-store sales growth is attributed to a higher number of rainy days than in the second quarter, according to Korea Investment & Securities.

Despite the increased rainy days in the third quarter, Korea Investment & Securities assessed that the reopening (resumption of economic activities) is ongoing. This is based on the fact that in July, the sales growth rate of ready-to-eat foods within the convenience store industry exceeded the overall sales growth rate. This is the first time in about three years, explained as a result of reopening effects such as the normalization of school attendance and increased demand for convenience store ready-to-eat foods due to rising consumer prices. Since ready-to-eat foods are differentiated products in the convenience store channel, the solid sales growth of ready-to-eat foods is viewed positively for BGF Retail by Korea Investment & Securities. They also forecast that the sales increase of ready-to-eat foods in the second half of the year will be favorable as reopening continues.

Korea Investment & Securities also explained that the recent stock price decline has increased valuation attractiveness. They pointed out that BGF Retail's price-to-earnings ratio (PER) for next year is around 12 times, which is lower than the 17 times during the peak of the COVID-19 pandemic in 2021. Meanwhile, despite concerns about the retail economy, the net increase in the number of convenience store outlets remains stable, they assessed.

Researcher Myungjoo Kim of Korea Investment & Securities advised, "This is a moment when a comfortable investment destination is needed due to ongoing macro uncertainties," and recommended "BGF Retail, which has high valuation attractiveness and solid profit resilience."