[Click eStock] "Core Business Is Strong, But..." Emart Target Price Cut from 100,000 Won to 67,000 Won

Hanwha Investment & Securities lowered its target price for Emart from 100,000 won to 67,000 won. It also downgraded its rating to "Hold."

According to Hanwha Investment & Securities on November 12, the target price cut reflected subsidiary underperformance that outweighed improvements in Emart's core business. Emart posted third-quarter revenue of 7.4919 trillion won and operating profit of 46.1 billion won. Revenue rose 1.2% year over year, while operating profit fell 70%. Operating profit also fell well short of the consensus estimate of 159.5 billion won.

"The standalone business recorded revenue of 5.104 trillion won and operating profit of 166 billion won, in line with consensus, but poor results at subsidiaries, including SCK Company (Starbucks) and Shinsegae E&C, outweighed the improvement in the core business," said Lee Jinhyeop, an analyst at Hanwha Investment & Securities. Following marketing events in the second quarter, SCK Company posted an operating loss of 45.3 billion won, while Shinsegae E&C recorded an operating loss of 99 billion won amid bad-debt provisions for unsold properties.

Hanwha Investment & Securities said it expects Emart's core business to perform well, citing Homeplus's worsening situation, among other factors. However, it also noted that uncertainty surrounding the subsidiaries remains excessive. Accordingly, it downgraded its rating from "Buy" to "Hold" and cut its target price to 67,000 won. Emart closed at 65,500 won the previous day.

"SCK Company continues to see a recovery in B2C-focused sales, but a decline in B2B volume is inevitable," Lee said. "Shinsegae E&C's pre-sale rate remains in the mid-80% range. It will take time to clear the unsold properties."

He also said that growing equity-method losses at Age Global Holdings, a Gmarket-Ali joint venture, were weighing on return on equity (ROE). "In addition to weak earnings, questions remain about the soundness of its capital allocation strategy, including its investment in Paramount through borrowing," he said.

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