[Click eStock] "Emart, Uncertainty in Profit Improvement... Conservative Approach Needed"

IBK Investment & Securities announced on the 16th that it maintains a 'Neutral' investment rating and a target price of 98,000 KRW for Emart.

Emart's consolidated sales for the fourth quarter of last year amounted to 7.4753 trillion KRW, a 9% increase compared to the same period last year. However, operating profit during the same period plummeted by 71.2% to 22.3 billion KRW, falling short of market expectations. While Emart's standalone operating profit nearly doubled, the overall performance was weak due to poor results from SCK Company (Starbucks Coffee Korea) and the exclusion of Shinsegae Live Shopping's consolidated profit and loss.

In the fourth quarter results, the gross profit margin (GP margin) improved, and selling and administrative expenses were managed at levels similar to the previous year. However, the unusually high same-store sales growth in the fourth quarter and the actual profit contribution mainly came from improvements in product margin rates. In other words, given the current outlook of sluggish same-store sales growth in the first quarter, the scope for profitability improvement is likely to be limited.

Nam Sung-hyun, a researcher at IBK Investment & Securities, stated, "Considering the uncertain consumption environment, the relationship between same-store sales and product margin rates, a clear increase in financial costs, and uncertainties in some subsidiaries, we recommend a conservative approach."