[Click eStock] "BGF Retail, Expected Increase in Headquarters Lease Effect and Operating Performance"

On the 11th, IBK Investment & Securities maintained a buy rating and a target price of 220,000 KRW for BGF Retail, stating that the convenience store industry is steadily growing and the effects of the increased proportion of headquarters-leased stores will become more prominent.

Nam Seong-hyun, a researcher at IBK Investment & Securities, explained, "The reason to focus on BGF Retail in 2024 is the high proportion of headquarters-leased stores. They have been aggressively expanding store openings while increasing the proportion of headquarters-leased stores, which is estimated to exceed 50% based on the total number of stores."

He continued, "With the expansion of the headquarters-leased store ratio, franchise fee rates have been increasing, and we expect depreciation expenses, which had increased due to headquarters leasing, to start decreasing. This is because we believe they have secured stable goodwill in the mid to long term. Although there will be additional investments in 2024, so the absolute amount of depreciation expenses is unlikely to decrease, the increase is expected to be limited as they enter a phase where depreciation expenses for headquarters-leased stores decline."

This effect is expected to continue until 2026, entering a phase where structural operating leverage effects will appear.

However, the business conditions in the fourth quarter of this year are understood to be somewhat sluggish, due to a decline in consumer sentiment and the impact of a high base from last year.

Nevertheless, operating performance is expected to increase. Researcher Nam added, "Fortunately, the base in December is relatively low, and considering the one-time costs from last year, operating profit is expected to turn upward due to the increase in franchise fee rates from the expansion of headquarters-leased stores. Therefore, there is no need to worry about the performance."