[Click e-Stock] "BGF Retail's 3Q Earnings Seen Temporarily Slowing; Target Price Cut"

Hanwha Investment & Securities Sets BGF Retail Target Price at KRW 190,000

Hanwha Investment & Securities said on Wednesday that it expects BGF Retail's third-quarter earnings to fall short of market expectations, lowering its target price from KRW 210,000 to KRW 190,000 while maintaining its "Buy" rating.

Hanwha Investment & Securities projected BGF Retail's third-quarter revenue at KRW 2.5 trillion, up 2% year on year, and operating profit at KRW 103.4 billion, up 6%. It forecast operating profit to come in below the consensus estimate of KRW 109.7 billion.

In September, same-store sales growth rebounded to around 2% to 3% as the base effect from consumer coupons faded. "This suggests that the weakness in third-quarter earnings can be viewed as a slowdown caused by a simple base effect, rather than a fundamental issue with the convenience-store business," said Lee Jinhyeop, an analyst at Hanwha Investment & Securities. "Despite the temporary slowdown in same-store sales growth, the product mix continues to improve, including an increased share of high-margin general merchandise sales. This should sustain year-on-year growth in gross profit margin, while slower increases in fixed costs such as amortization should keep operating profit on an upward trajectory."

However, price hikes for processed foods in the second half are expected to have a positive impact on product-mix improvement. Another point worth noting is that foreign tourists are accounting for an increasing share of convenience-store sales.

"One characteristic of foreign tourists is that tobacco accounts for only around 10% of their purchases, compared with 30% to 40% for domestic customers," the analyst said. "The structural growth in foreign tourism is expected to contribute to the expansion of convenience stores' top line while also positively affecting profitability."

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