Heungkuk Securities on the 16th said it expects Lotte Shopping's earnings momentum to strengthen starting in the fourth quarter of this year. It raised its target price to 97,000 won from 85,000 won and maintained a buy rating. Lotte Shopping's closing price in the previous session was 75,700 won.
Heungkuk Securities estimated Lotte Shopping's fourth-quarter sales at 3.5 trillion won, up 1.0% from a year earlier, and operating profit at 235.5 billion won, up 60.0%.
Along with a low base in the fourth quarter of last year, department stores continue to post solid results by business segment. The grocery businesses, such as discount stores and supermarkets, which were weak in the previous quarter, are also improving, and operating losses at the electronics specialty stores are expected to narrow. The e-commerce business has also steadily reduced operating losses this year.
Next year, results are expected to show a recovery as the consumer environment improves. Heungkuk Securities forecast Lotte Shopping's annual consolidation-basis sales and operating profit next year at 13.9 trillion won and 627.2 billion won. That would be up 1.5% and 13.0%, respectively, from a year earlier.
Park Jong-ryeol, an analyst at Heungkuk Securities, said, "Gradual improvement in the growth rate of domestic consumer spending is possible thanks to positive asset effects, real wage increases, more foreign visitors to Korea, and improving consumer sentiment."
Park added, "Lotte Shopping's price-earnings ratio (P/E) and price-to-book ratio (P/B) on this year's basis are still undervalued at 10.8 times and 0.1 times, respectively, and it retains its appeal as a dividend stock."