[Click eStock] "Emart Restructuring Needed... Investment Opinion and Target Price Downgraded"

Heungkuk Securities evaluated on the 11th that Emart requires bold and significant restructuring to address its deteriorating financial structure. Accordingly, the investment rating was downgraded to 'Hold,' and the target stock price was lowered to 65,000 KRW.

Jongryeol Park, a researcher at Heungkuk Securities, stated, "Along with efforts to improve profitability in the standalone segment centered on discount stores, bold decisions are needed in a selection and concentration approach for subsidiaries under consolidation that are continuously operating at a loss and are unlikely to improve in the future." He explained that financial structure improvement based on reducing excessive borrowings must precede.

The second-quarter performance is expected to continue showing a loss. Researcher Park forecasted, "On a consolidated basis, second-quarter sales are expected to decrease by 2.7% year-on-year to 7.1 trillion KRW, and operating loss is expected to be 41.2 billion KRW, indicating somewhat sluggish results are inevitable." This is because, despite improvements in standalone subsidiaries (discount stores, Traders, specialty stores), the operating performance of consolidated subsidiaries is expected to be weak.

Researcher Park added, "Among consolidated subsidiaries, e-commerce (SSG.COM, Gmarket) is showing continuous reduction in losses due to cost control efforts to strengthen profitability, which is positive," and "the performance improvement of some subsidiaries such as SKC Company and Chosun Hotel is expected to continue." However, he assessed that the scale of reduction in operating losses at Shinsegae Construction will affect consolidated operating profit.