[Click e Stocks] "BGF Retail, Stable Performance Trend and Attractive Valuation"

On the 4th, KB Securities maintained a buy rating and a target price of 240,000 KRW for BGF Retail, stating that although strong performance is expected again this year, interest may weaken due to a slowdown in growth rate caused by a high base effect.

Shinae Park, a researcher at KB Securities, explained, "BGF Retail's same-store sales have grown significantly over the past two years, and despite the high base, same-store sales are expected to grow by around 3% this year. We anticipate that BGF Retail will continue to solidify its position as the number one convenience store operator in terms of same-store sales growth rate, number of stores, and profitability this year as well."

In the first quarter of this year, BGF Retail's consolidated sales amounted to 1.8496 trillion KRW, a 9% increase compared to the same period last year, while operating profit decreased by 2% to 37 billion KRW, generally meeting consensus estimates. On a separate basis, sales and operating profit increased by 9% and 3%, respectively.

Researcher Park stated, "Excluding the effect of self-diagnostic kit sales from the same period last year, operating profit increased by 20%. Although the apparent separate operating profit margin (OPM) seems to have deteriorated by 0.1 percentage points, it is estimated to have improved by 0.2 percentage points when excluding one-time gains from the previous year."

This is attributed to the expansion of headquarters-leased stores, which caused the average franchise fee rate to rise by 0.2 percentage points, and the fact that the proportion of tobacco sales did not increase.

The same-store sales growth rate recorded 4.7%, which is presumed to be due to favorable weather in February and March and a low base effect from the same period last year. The number of stores increased by a net 230 in the first quarter.

However, the combined profit and loss of subsidiaries showed an operating loss of 2.8 billion KRW, falling short of the expected operating loss of 1 billion KRW. Researcher Park added, "This is because investments in logistics infrastructure, which accompany sales and store expansion, were executed. We expect profitability to normalize in the peak season of the second and third quarters when the operating rate (cargo volume) increases."