Samsung Securities on the 12th said that while Emart's third-quarter results were weak, it expects a recovery in the fourth quarter. It maintained a Buy rating and a target price of 113,000 won. Emart's previous closing price was 76,900 won.
For the third quarter this year on a consolidation basis, revenue came in at 7.4 trillion won, down 1.4% from a year earlier. Operating profit totaled 151.4 billion won, up 35.5% year over year, which matched the lowered consensus (market forecast).
Baek Jae-seung, a Samsung Securities analyst, said, "The parent company experienced a decline in revenue due to the effect of consumption coupons and the delayed Chuseok," and noted, "The e-commerce business, whose results slowed in the second quarter during the full-scale outsourcing of logistics capabilities, remained sluggish in the third quarter."
Samsung Securities expects Emart's e-commerce business to take some time to recover profitability. However, it said that considering deferred sales due to the timing difference of Chuseok and the low base in December last year, the mart business is expected to show a marked recovery in the fourth quarter.
Baek said, "At that time, profitability improvement based on integrated purchasing of the mart and supermarket businesses is also expected to become more visible."
Gmarket, which obtained conditional merger approval, is slated to be changed to a subsidiary in November by applying the equity method. Changes are not yet reflected in Emart's estimates.
Baek analyzed, "In addition to this accounting effect, when collaboration with the Ali Group going forward leads to an expansion of seller onboarding and stronger global sourcing capabilities that translate into a results recovery, Gmarket will begin to contribute in earnest to enhancing Emart's corporate value."
Although it remains to be seen whether the pre-approval merger and acquisition (M&A) of Homeplus Co. will be completed, competition within the hypermarket format may ease going forward. It also said it maintains a Buy rating, considering that Emart has shifted its strategic direction from sales expansion to selective focus on improving profitability.