[Click eStock] "Emart's Earnings Improvement Becoming Visible... Target Price Raised"

Target Price Raised from 110,000 Won to 120,000 Won

On July 14, Shinhan Investment & Securities raised its target price for Emart from 110,000 won to 120,000 won, anticipating that the company's earnings improvement will become more visible. The investment opinion remains 'Buy'.

Shinhan Investment & Securities analyst Cho Sanghoon explained, "We raised the target price by 9% compared to the previous figure, reflecting the change in the base date for target price calculation and the upward revision of earnings estimates based on easing competitive intensity." He added, "Valuation remains attractive, and we expect structural earnings improvement and a rise in return on equity (ROE) driven by enhanced core business competitiveness."

Emart's earnings for the second quarter of this year are expected to exceed market expectations. Analyst Cho stated, "Emart's second-quarter revenue is projected to reach 7.13 trillion won, up 1.1% year-on-year, and operating profit is expected to turn to a surplus of 35.7 billion won, surpassing the consensus (average securities firm forecast) by 8%." He added, "Although top-line growth was disappointing amid sluggish domestic consumption, both the standalone company and its subsidiaries are expected to deliver strong results thanks to overall easing of competition."

Same-store sales growth is estimated at -0.5% for discount stores and 5% for Traders. Analyst Cho said, "Sales growth remains sluggish, but operating profit is expected to turn positive due to improved gross margin from integrated purchasing effects and cost efficiency efforts." He further analyzed, "With the corporate rehabilitation process for Homeplus dragging on and store closures beginning at the end of July, Emart is expected to benefit from these developments in earnest."

The earnings improvement trend driven by strengthening the core business is expected to become more visible. Analyst Cho stated, "Synergies from integrating offline businesses and strengthening core business competitiveness will make the earnings improvement trend more apparent." He added, "The easing of competition among discount stores, the turnaround of subsidiaries, and improved purchasing power supported by domestic demand stimulus measures following the launch of the new government are all positive factors."