[Click eStock] "Stock Trend Positive... Emart Maintains Target Price at 105,000 Won"

Korea Investment & Securities maintained its buy rating and target price of 105,000 KRW for Emart on the 16th, stating that "a favorable stock price trend is expected to continue."

On the same day, Myungjoo Kim, a researcher at Korea Investment & Securities, said, "For the first time in a while, favorable supply and demand is coming into the retail sector. Among the sectors, Emart is the stock with the greatest upside risk (the stock price rises without benefiting profits)."

Emart's consolidated sales announced on the 13th amounted to 7.056 trillion KRW, down 3.0% from the same period last year, and an operating loss of 34.6 billion KRW was recorded, meeting market expectations. Researcher Kim emphasized, "It is very positive that the gross profit (GP) margin of discount stores improved by 0.6 percentage points compared to the same period last year, even though joint purchasing among retail channels (Mart, Everyday, Emart24) has not yet fully started. We have been undergoing restructuring this year, and related voluntary retirement costs (about 7.8 billion KRW) also occurred. Even including this, the separate selling and administrative expenses decreased by 1.2% compared to the same period last year, which is positive."

Emart showed a favorable stock price trend (6.0% increase) over the past month. This contrasts with the KOSPI index, which fell about 7.4% during the same period. Emart is considered one of the companies most affected by the growth of the online industry, but the possibility of bankruptcy of Tmon and Wemakeprice has increased the likelihood of a reorganization of the online market. Researcher Kim noted, "The combined estimated market share of Tmon and Wemakeprice in the retail market is around 1.5%. Even if they actually go bankrupt, it will not significantly contribute to the performance improvement of traditional retailers," but added, "The reorganization of the online market could lead to a relaxation of competition within the retail market, which is positive for the valuation (stock price level relative to corporate value) recovery of traditional retailers."

If consumer demand for home dining recovers in the second half of the year, Emart's performance improvement is expected to occur faster than the market anticipates. Researcher Kim explained, "Despite the sluggish domestic economy in the first half of this year, consumer home dining consumption did not increase. This was one of the factors behind the poor same-store sales growth of Emart discount stores," "Although the domestic economy recovered slowly after the end of COVID-19, the demand for overseas travel by domestic residents normalized quickly, which was negative for retailers." He also added, "With the Japanese government ending the super-weak yen policy, there is even an expectation that Korean demand for travel to Japan will slow down in the second half compared to the first half."