Daishin Securities said on the 20th that while the core business of E-MART(139480) improved, it was disappointing that subsidiaries including Starbucks underperformed. It maintained a "Buy" investment opinion and lowered the target price to 108,000 won. E-MART's previous closing price was 76,100 won.
E-MART posted net sales of 691.5 billion won and an operating loss of 43 billion won in the second quarter this year. Net sales fell 2% from a year earlier, and operating profit swung to a loss. As a result, it significantly missed the market and Daishin Securities' consensus (the average of market forecasts).
On a separate basis, same-store sales growth at discount stores and Traders was very solid at 3.8% and 4.7%, respectively. The gross margin also improved by 0.3 percentage point (p).
Yoo Jeong-hyun of Daishin Securities said, "Separate operating profit at discount stores increased from a year earlier as both traffic and basket size at large offline channels improved."
The problem was the performance of subsidiaries under consolidation. Operating profit of consolidated subsidiaries fell by 86.5 billion won from a year earlier to an operating loss of 50 billion won, swinging to a loss.
In particular, SCK Company, which includes Starbucks, posted an operating loss of 18.4 billion won, down 58.7 billion won from a year earlier, swinging to a loss. Shinsegae Engineering & Construction saw a sharp expansion in operating losses due to large provisions for receivables with low recoverability, leading to the view that weakness at subsidiaries diluted the strong results of the core business.
Yoo said, "We lowered the target price in light of the poor performance of subsidiaries and the entry into a phase where earnings visibility is declining again," adding, "Although it is unlikely that major affiliates' weakness will improve immediately, it is positive that E-MART's core business conditions are improving."