[Click eStock] "Lotte Shopping, Domestic Demand Stimulus Expectations Remain Valid... Target Price Up"

Target Price Raised from 70,000 KRW to 80,000 KRW

On the 15th, LS Securities raised the target price for Lotte Shopping from 70,000 KRW to 80,000 KRW, viewing the expectations for domestic demand stimulus measures as valid. The investment rating was maintained as 'Buy.'

Orin Ah, a researcher at LS Securities, explained, "The target price increase is due to changing the earnings forecast basis to a 12-month forward-looking period. The improvement in financial structure through asset revaluation is positive, and in the short term, expectations for the new government's domestic demand stimulus measures remain valid. In the mid to long term, it is also necessary to continuously monitor the growth story related to overseas business expansion."

Lotte Shopping's first-quarter performance this year is expected to meet market forecasts. Researcher Oh said, "Lotte Shopping's consolidated total sales for the first quarter are estimated to be 4.8908 trillion KRW, a 1.3% decrease compared to the same period last year, and operating profit is expected to increase by 18.3% to 135.8 billion KRW, in line with consensus (average securities firm forecasts). The existing growth rate of domestic department stores is estimated to be around 0-1%, and operating profit is expected to increase by 21.3% to 109.6 billion KRW due to a one-time cost of 23.7 billion KRW related to voluntary retirement in the first quarter of last year," he said. He added, "Discount stores are estimated to have a same-store sales growth rate of about 0% in the first quarter due to March promotional events, and operating profit is expected to decrease by 32.1% due to costs related to the launch of the Zeta app in the first quarter and the transfer of Okado-related costs from the e-commerce division to discount stores. Lotte Hi-Mart is expected to see a slight reduction in sales decline, and home shopping will continue to show steady performance."

A positive environment is expected for domestic industries. Researcher Oh said, "Expectations for domestic industries, which are relatively free from tariffs, remain valid, and the department store business also has expectations for the new government's domestic demand stimulus measures around the early presidential election. Expansion of overseas store openings is also positive. Discount stores are expected to increase buying power and market share due to competitors entering corporate rehabilitation. Other consolidated subsidiaries are also judged to have passed their worst phase," he said.

LS Securities forecast Lotte Shopping's annual performance this year to have net sales increase by 0.3% year-on-year to 14.024 trillion KRW, and operating profit to rise by 22.4% to 579.1 billion KRW.