[Click eStock] "Emart, Performance Improvement Expected Through Structural Reform... Target Price Set at 82,000 Won"

Coverage Resumed with Investment Opinion 'Buy' and Target Price of 82,000 Won

LS Securities resumed coverage on Emart on the 31st, forecasting a noticeable trend of performance improvement within the industry due to structural reforms, with a 'Buy' investment rating and a target price of 82,000 KRW.

Orin Ah, a researcher at LS Securities, stated, "Despite limited top-line (sales) growth due to sluggish consumption, the base effect and cost slimming efforts are positive, leading to a prominent trend of performance improvement within the industry."

Profitability is evaluated as favorable despite weak consumption. Researcher Oh estimated, "Emart's Q3 performance this year is expected to show consolidated sales of 7.6754 trillion KRW, a 0.4% decrease compared to the same period last year, and operating profit of 104.6 billion KRW, a 34.3% increase. The existing store growth rate for discount stores this year is estimated at around -3%, and for Traders existing stores at about -1 to -2%. Although sales growth has slowed due to domestic demand weakness, the gross profit margin (GPM) has improved by about 0.2 to 0.3 percentage points each quarter, leading to an expected separate basis operating profit of 121 billion KRW, a 9.8% increase year-on-year." She explained that in consolidated results, there is a base effect from the expanded operating loss of Shinsegae Construction in Q3 last year, and improvements are expected due to the price increase effect on some Starbucks products and efficiency efforts in the online business division.

Structural reform efforts are translating into performance improvements. Researcher Oh analyzed, "SSG.com conducted voluntary retirement for headquarters employees with over two years of service in July this year, and related costs will be temporarily reflected; excluding this, the online sector is showing performance improvements through logistics efficiency and cost reductions. The Gmarket division has also been conducting voluntary retirement since the end of September, and the annual cost savings from this are estimated at around 20 billion KRW." She added, "SCK Company is expected to see the effect of the price increase implemented in August as the exchange rate and coffee bean price increases have somewhat stabilized compared to last year."