Kiwoom Securities on the 14th said GS Retail's second-quarter earnings will improve on the back of strong domestic demand. It kept its Buy rating and raised its target price to 27,000 won from 24,000 won. The previous trading day's closing price of GS Retail was 38,500 won.
Kiwoom Securities expected GS Retail's first-quarter sales on a consolidation basis to come in at 2.846 trillion won, up 3.5% from a year earlier, with operating profit up 23.8% to 52 billion won.
It also projected that in the second quarter, sales on a consolidation basis will be 3.067 trillion won and operating profit will be 93 billion won.
Convenience store sales, buoyed by domestic demand, were cited as a driver of the earnings improvement.
Park Sang-jun, an analyst at Kiwoom Securities, said, "Despite a stagnating growth rate in the number of convenience stores, sales at existing convenience store locations will grow 3% thanks to strong domestic consumption and factors such as stockpiling of pay-as-you-throw trash bags."
Park also saw earnings improving in the supermarket and home shopping businesses on the back of domestic consumption. Park said, "Supermarkets and home shopping will also show solid sales trends in line with robust domestic consumption," adding, "Year-over-year results are expected to be solid."
Park projected that GS Retail will benefit from high oil price relief payments to be disbursed starting on the 27th of this month.
Park said, "In the second quarter, benefits are expected from the disbursement of high oil price relief payments," adding, "Sales growth in the convenience store institutional sector is expected to be solid."
By contrast, earnings growth appears likely to slow from the third quarter. Park said, "After the third quarter, there will be a heavy reverse base effect due to last year's livelihood recovery consumption coupon support," adding, "Growth at existing convenience store locations is expected to gradually slow."