[Click eStock] Emart Exceeds Q1 Expectations... Profit Expected in Q2

On May 14, IBK Investment & Securities maintained its "Buy" investment rating and target price of 104,000 won for Emart, stating that the company delivered results that exceeded expectations in the first quarter of this year. The previous day's closing price was 84,800 won.

On this day, Nam Sung-hyun, an analyst at IBK Investment & Securities, said, "Emart has significantly improved its profitability by continuously working to ease the burden of fixed costs rather than focusing on expanding its scale."

In the first quarter, Emart's sales reached 7.2189 trillion won, up 0.2% from the same period last year, while operating profit surged 238.2% to 159.3 billion won. Notably, operating profit exceeded IBK Investment & Securities' estimate of 143.2 billion won by 11.2%.

Regarding the strong performance, analyst Nam explained, "The company benefited from the reduction in fixed costs as a result of intensive restructuring carried out last year, and improved its margin rate through profitability-focused strategies. There was also growth in the overseas business division and some subsidiaries, as well as positive effects from increased progress rates in Shinsegae Construction's own projects and business division restructuring." He added, "Even when taking structural effects into account, the company's fundamentals are improving. These effects are expected to continue into next year."

However, it is disappointing that, despite SSG.com’s aggressive promotional campaigns, the increase in gross merchandise volume was limited. Nam noted, "While we expect profitability to improve in the second half of the year and performance growth due to an increase in delivery days, the first quarter results were somewhat disappointing."

He projected that the company could return to profitability in the second quarter. Nam added, "Although fixed costs will be burdensome in the second quarter due to property tax issues, we believe the likelihood of turning a profit is high, considering the effects of fixed cost reduction, improved profitability from integrated purchasing, increased earnings from changes in Shinsegae Property's accounting standards, and a decrease in PPA (purchase price allocation) expenses."