April 27, 2024

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[THE INVESTOR] E-mart will be able to capitalize on Emart24, said NH Investment and Securities on Nov. 24, maintaining a “buy” recommendation and raising the target price to 320,000 won (US$295.34) from 280,000 won.

The convenience store chain has established a 3-NO policy (forcing 24-hour operation, royalty and mid-term termination penalty) and receives monthly membership fee instead of sharing profits, said analyst Lee Ji-yeong. It also introduced a payback system for the storeowners, she added.

Burdened by the minimum wage hike and restructuring that folds underperforming branches and raises pressure for higher revenue from each store, storeowners will prefer Emart24’s less stringent contract terms, noted the analyst. 

Storeowners will also seek to expand higher-margin products rather than tobacco, which takes up 40 percent of product portfolio despite low margins, and Emart24 will be able to differentiate itself with the parent company’s private brands such as No Brand and Peacock, explained Lee. 

E-mart will gain from selling the PB products that will more than offset the weak profitability from not sharing the proceeds with shop owners, forecast the analyst. Revenue from No Brand and Peacock this year will reach 500 billion won and 350 billion won, respectively, according to Lee , who added that the retail giant is also showing results from new businesses. 

By Hwang You-mee (glamazon@heraldcorp.com)