[Click eStock] "GS Retail, the Start of a Turnaround... Target Price Up"

[Asia Economy Reporter Kwon Jaehee] NH Investment & Securities maintained a 'Buy' rating on GS Retail on the 8th and raised the target price by 8.3% from the previous to 36,000 KRW.

GS Retail's Q4 consolidated sales and operating profit were 2.8885 trillion KRW and 85.3 billion KRW, respectively, exceeding the consensus on operating profit. Considering the one-time gain of 17.8 billion KRW related to home shopping tax refunds, the performance was still favorable. However, net profit temporarily turned to a loss due to asset impairment and foreign fund exchange losses.

The convenience store same-store sales growth rate recorded 3.6%. Although IT investment and advertising promotion costs increased, operating profit also rose year-on-year due to margin improvement from strong general merchandise sales. The net increase in stores in 2022 was 949, exceeding the target and maintaining a favorable trend, with a net store increase target of 800 for 2023.

It is encouraging that the supermarket division achieved a turnaround to profitability in Q4 despite the seasonal off-season for the first time in several years. The home shopping division also showed a positive trend of increased profits compared to the previous year, even excluding the one-time gain related to tax refunds. The hotel division has become a stable business contributing an annual operating profit of about 70 billion KRW, surpassing pre-COVID-19 levels due to increased occupancy rates and average spending per customer.

Joo Younghoon, a researcher at NH Investment & Securities, said, "The scale of operating losses in online dawn delivery and other divisions decreased by 8.9 billion KRW compared to the same period last year, and performance improvements are simultaneously occurring across all business divisions, including hotels and supermarkets," adding, "Since the company’s value has not been properly evaluated due to poor performance in non-convenience store businesses, a stock price rebound is expected."