[Click e-Stock] "Emart: E-commerce Losses Widen, Target Price Lowered"

On August 13, Shinhan Investment & Securities revised its target price for Emart, lowering it by 8% to 110,000 won. The company cited widening losses in the e-commerce business as the reason for the adjustment.

In the second quarter of this year, Emart reported sales of 7.04 trillion won, down 0.2% compared to the same period last year. Operating profit turned positive, reaching 21.6 billion won. However, this figure fell short of market expectations by 32%.

Standalone sales growth remained sluggish. However, improvements in gross profit margin, driven by the benefits of integrated purchasing, and overall cost-efficiency efforts led to a turnaround in operating profit. With Homeplus's corporate rehabilitation process dragging on and store closures beginning at the end of July, Emart is expected to see a tangible boost from these developments.

Subsidiary performance was also weak. Losses widened in the e-commerce segment, which includes SSG.com and Gmarket, while SCK Company saw its operating profit decline by 6% due to rising costs.

Shinhan Investment & Securities analyst Cho Sanghoon commented, "While standalone operations performed well thanks to a recovery in core competitiveness amid sluggish domestic consumption, it is disappointing that e-commerce subsidiaries saw their losses widen." He added, "We are lowering our target price by 8% to 110,000 won."

Cho maintained his top pick rating on the sector, stating, "Earnings improvements have become visible, driven by offline business integration synergies and strengthening of core competitiveness." He continued, "The easing of discount store competition and the turnaround of subsidiaries are also positive factors. After the launch of the new government, purchasing power is expected to improve, supported by domestic demand stimulus measures."