[Click eStock] "Emart's Q2 Results Likely to Miss Expectations Due to Starbucks... Target Price Cut"

On July 8, Hanwha Investment & Securities lowered its target price for Emart from 130,000 won to 100,000 won, citing weaker-than-expected second-quarter results due to the underperformance of Starbucks. However, it maintained its "Buy" investment rating.

Jinhyup Lee, a researcher at Hanwha Investment & Securities, explained, "The downward revision of the target price reflects the impact of SCK Company (Starbucks) in the earnings forecast, leading us to lower our 12-month forward return on equity (ROE) projection from 2.5% to 2%."

Emart’s second-quarter results this year are expected to significantly fall short of market expectations. Lee estimates, "Second-quarter operating profit for Emart will reach 19.8 billion won, down 8% year-on-year, falling well below the consensus estimate of 74.6 billion won. This is primarily due to the poor performance of SCK Company. SCK Company, which faced issues stemming from a specific marketing event, is expected to post a revenue decline of 18% to 653.7 billion won and an operating loss of 13.1 billion won. In June, when the company regularly holds a high-volume frequency event, sales disruptions appear to have been particularly severe."

However, the core business, such as discount stores, is expected to remain solid. Standalone operating profit is projected to rise 135% to 36.7 billion won, in line with the consensus of 35.2 billion won. Lee predicts, "For the second quarter, comparable store sales growth is estimated at 1.5% for discount stores and 3% for Traders. Despite having one fewer public holiday compared to the previous year and the inevitable negative impact of high oil price subsidies, robust growth was achieved. This is mainly due to domestic consumption growth and positive spillover effects from Homeplus, which became evident from the second quarter."

It is inevitable that earnings forecasts will need to be revised downward. Lee noted, "The marketing issue at SCK Company has not yet been fully reflected in the market consensus, making at least one consensus downgrade unavoidable. However, after this downward adjustment, there is a high likelihood of an upward revision. This is because, as the spillover benefits from Homeplus have been confirmed in the data since the second quarter, the court has decided to end Homeplus’s corporate rehabilitation proceedings." He added, "If competitors absorb 30% of Homeplus’s sales, Emart’s operating profit could improve by about 300 to 400 billion won."

This content was produced with the assistance of AI translation services.