NH Investment & Securities said on the 25th that Lotte Shopping's first-quarter results are expected to beat market expectations, backed by growth in department store and discount store performance. It kept its "Buy" rating and raised the target price to 133,000 won from 120,000 won. Lotte Shopping's closing price in the previous session was 105,000 won.
Researcher Ju Young-hun at NH Investment & Securities said, "High growth in department store sales and benefits at discount stores are appearing at the same time," and added, "Given the low price-to-book ratio (PBR), there appears to be room for further valuation (corporate value) upside."
Specifically, it projected that department stores will be able to improve profitability as sales to both foreign and domestic customers are improving sharply and sales of fashion, a high-margin category, are also increasing. For discount stores, it estimated that the spillover benefits from weaker competitiveness at rival Homeplus Co. are beginning to materialize in earnest.
Accordingly, it forecast Lotte Shopping's first-quarter revenue at 3.5954 trillion won and operating profit at 210.4 billion won. Those represent increases of 4% and 42%, respectively, from a year earlier. It estimated growth rates of 10% for department stores and 2% for discount stores.
NH Investment & Securities derived Lotte Shopping's target price by applying a PBR of 0.22 times to this year's expected equity capital. That corresponds to the valuation in 2023, when it posted net profit. As performance in key business divisions improves this year and non-operating impairment losses narrow, it judged that the likelihood of a net profit is high.
Meanwhile, Ju added, "Among major subsidiaries, Cultureworks' results are expected to improve thanks to the 'The King's Warden' effect, which surpassed 10 million moviegoers."