[Click eStock] "Lotte Himart Expected to Turn Profitable in Q2"

On May 8, IBK Investment & Securities maintained its "Buy" rating and target price of 9,000 won for Lotte Himart, stating that a turnaround to profitability is expected starting from the second quarter of this year.

On this day, Nam Sung-hyun, a researcher at IBK Investment & Securities, stated, "Lotte Himart's first-quarter results met IBK Investment & Securities' expectations. The company posted sales of 529 billion won, a 0.7% increase year-on-year, and an operating loss of 11.1 billion won, with the loss narrowing," he said.

In the first quarter, large home appliances, household and kitchen appliances, and IT and mobile products drove performance growth. Nam explained, "The improvement in results is the outcome of business structure changes and fundamental improvements. Since the second half of last year, the rate of negative growth has started to decrease, and after the direct employment of promotional staff, both online and offline customer attraction has recovered."

He particularly noted, "In the first quarter, online sales increased by 9.5% and offline sales by 2.4%. Although the company did not achieve a turnaround to profitability, these are positive figures."

He added, "Excluding one-off factors (30 billion won in retroactive ordinary wage payments), the operating loss would have decreased further to 8.1 billion won. Despite being the off-season, the product margin rate reached 28.7 percentage points, marking the highest level ever for both the peak season and the first quarter. This improvement exceeded the increase in labor costs resulting from the direct employment of promotional staff."

Operating profit for the second quarter is estimated at 13.9 billion won, and for the third quarter at 25.7 billion won. Annual operating profit for this year is projected to reach 18.2 billion won, representing a 956.2% increase compared to the previous year.

Nam emphasized, "Both online and offline customer attraction capabilities are expanding, and there is a meaningful growth trend in household and global appliances. Margin expansion is expected due to increased sales of seasonal appliances, the effect of private brand renewal, and growth in care service sales."

Additionally, Nam stated, "The transaction environment is showing signs of improvement," and added, "As real structural reforms have led to improvements in the distribution structure, the company is expected to shift to a growth trajectory."