[Click eStock] "Emart, Structural Performance Improvement Is Urgent... Target Price Down"

Target Price Revised Downward by 7% Compared to Previous Level

Shinhan Investment Corp. on the 14th lowered the target price for Emart from 67,000 KRW to 67,000 KRW, viewing structural earnings improvement as an urgent task. The investment opinion was maintained as 'Trading Buy'.

Researcher Jo Sang-hoon of Shinhan Investment Corp. said, "The target price was lowered by 7% compared to the previous one, reflecting the decline in valuation in the same industry," adding, "The forward price-to-book ratio (PBR) for 2025 is 0.15 times, indicating an absolute undervaluation zone, but structural earnings improvement through an increase in return on equity (ROE) is an urgent task."

Emart continued to post losses in the second quarter of this year. The second-quarter sales recorded 7.1 trillion KRW, down 3% year-on-year, and the operating loss narrowed to 34.6 billion KRW. Researcher Jo analyzed, "Poor performance continued. While the core business growth was sluggish, some subsidiaries performed well, such as the reduction of e-commerce losses and profit increase of SCK Company."

The same-store sales growth rate was -3% for discount stores and 0.1% for Traders. Researcher Jo said, "Separate sales were sluggish due to structural demand slowdown in offline channels and store renovations, but operating losses were reduced. However, it is premature to judge a structural turnaround." This is because the average spending per customer continued to decline compared to customer recovery, and July performance showed further sluggishness with same-store sales growth rates of -8.5% for discount stores and -7.4% for Traders.

Subsidiary performance showed mixed results. Researcher Jo explained, "The reduction in losses in the e-commerce business and profit increase of SCK Company are positive, but the widening losses of Shinsegae Construction and Emart24 had a negative impact."

It was pointed out that earnings improvement through strengthening core business competitiveness is necessary. Researcher Jo said, "The fundamental decline in the attractiveness of the discount store channel amid the threat of C-commerce and the still low earnings visibility of Shinsegae Construction are also concerns. For an upgrade in investment opinion, offline business integration synergy must become visible, which is expected to begin in earnest from 2025. Until the earnings improvement through strengthening core business competitiveness becomes apparent, a conservative approach is necessary."