[Click eStock] "Emart, the Start Toward Operating Profit of 1 Trillion Won"

Target Price Raised from 95,000 KRW to 104,000 KRW

IBK Investment & Securities has raised the target price for Emart from 95,000 KRW to 104,000 KRW, expecting a significant improvement in operating performance despite unfavorable business conditions in the first quarter of this year, thanks to structural improvements. The investment rating was maintained at 'Buy.'

Emart is expected to meet market expectations despite challenges in recovering customer traffic due to fewer operating days in the first quarter and a downturn in the domestic economy. Consolidated sales for the first quarter are estimated at 7.4151 trillion KRW (up 2.9% year-on-year), and operating profit at 143.2 billion KRW (up 204% year-on-year).

Nam Seong-hyun, a researcher at IBK Investment & Securities, cited the following factors behind the strong performance: ▲ fixed cost reduction effects from last year's intensive restructuring ▲ increased product margin rates due to profitability improvement and purchasing integration ▲ decrease in PPA (amortization related to goodwill) due to exclusion of Gmarket consolidation ▲ improved profitability of consolidated subsidiaries.

Second-quarter performance is also expected to turn profitable compared to the same period last year. Researcher Nam stated, "Although the second quarter is a period burdened by fixed costs due to property tax issues, considering ▲ fixed cost reduction effects ▲ profitability improvement from purchasing integration ▲ profit increase from accounting standard changes at Shinsegae Property ▲ decrease in PPA, the possibility of profitability is high."

Improvement in SSG.com’s performance is also a positive factor. Researcher Nam said, "The efficiency of logistics costs at SSG.com and profitability improvement at the Neo Logistics Center are expected to contribute to profit improvement in the second half. While the increase in transaction volume is an important variable, both scale and profitability are expected to improve due to ▲ expansion of weekly 7-day delivery by major logistics companies increasing delivery days ▲ enhanced supply capacity through the use of partner logistics centers."