[Click eStock] "Emart, Undervalued... Subsidiary Profit and Loss Improvement Expected"

On the 23rd, KB Securities maintained a buy rating and a target price of 140,000 KRW for Emart, judging that it is undervalued.

Emart's consolidated net sales are expected to grow by 3% this year, and operating profit is projected to increase by 146%. On a separate basis, operating profit is estimated to decrease by 10%. This is analyzed to be due to a high base effect causing a slight slowdown in same-store sales growth, resulting in a 0.2 percentage point decline in operating profit margin despite efforts to improve cost efficiency. However, there is a possibility that earnings estimates could be revised upward if consumer spending performs better than expected this year.

Shinae Park, a researcher at KB Securities, explained, "The division contributing most significantly to overall profit improvement is Starbucks, with operating profit expected to increase by 79% this year," adding, "E-commerce operating losses are also expected to shrink by 63.8 billion KRW compared to the previous year." She continued, "Since the second half of last year, operations have focused on profitability, limiting top-line growth, but the trend of improving profits compared to the previous year is expected to continue."

For the first quarter of this year, consolidated net sales are expected to increase by 2.5% year-on-year to 7.1775 trillion KRW, and operating profit is forecasted to rise by 121% to 76.2 billion KRW.

Total sales at discount stores are expected to decline by 1%, and operating profit is projected to decrease by 7%. Although the increase in PP center fees compared to the previous year has narrowed since the fourth quarter of last year, the same-store sales growth has been somewhat sluggish, leading to an estimated rise in selling and administrative expense ratio.

Traders are also expected to see total sales and operating profit decrease by 0.3% and 12%, respectively, due to weak same-store sales. SSG.com’s net sales are projected to grow by 5%, with operating losses expected to shrink by 7 billion KRW. Gmarket Global’s operating losses are also anticipated to decrease by 7.3 billion KRW. The operating profit margin is estimated at 5.5%, which remains 2 percentage points lower than the historical first-quarter average.