Korea Investment & Securities noted that BGF Retail's second quarter performance this year is expected to fall short of market expectations (consensus). This is due to sluggish sales compounded by poor product profit margins, attributed to cooler weather compared to average years. However, if convenience stores are included as eligible usage locations for the livelihood recovery consumption coupon, one of the key pledges of the Lee Jae-myung government, sales are expected to recover quickly. The target stock price is 140,000 won, and the investment opinion remains "buy."
BGF Retail's expected sales for the second quarter this year are projected to be 2.2577 trillion won, with operating profit expected to be 71.1 billion won. Operating profit has decreased by 6.8% compared to the same period last year and is 7.3% lower than the consensus.
Kim Myung-joo, a researcher at Korea Investment & Securities, said, "As in the first quarter, we expect that the growth of existing stores will be sluggish due to the influence of the weather and that product profit margins will decline slightly. The franchise fee rate is also likely to be similar to last year's second quarter," he explained.
However, sales are expected to increase somewhat after the distribution of the livelihood recovery consumption coupon in the third quarter. During the COVID-19 pandemic, disaster relief funds were spent at convenience stores, with 5% to 6% of the total support money used there. Considering this, BGF Retail can expect an additional 100 billion won in sales following the distribution of this livelihood support.
Kim noted, "However, since the consumption coupon will replace some of the existing convenience store sales, the actual additional sales are expected to be less than the estimated amount." He further explained that the anticipation regarding the distribution of the livelihood coupon appears to have been fully reflected in the rising stock price over the past month.