BGF Retail Co., Ltd. Q3 Operating Profit Up 10% Despite Slowing Same-Store Growth... Target Price 185,000 Won

[Financial News] Korea Investment & Securities Co., Ltd. projected that BGF Retail Co., Ltd. will meet market expectations for operating profit in the third quarter of this year, driven by the effect of reduced depreciation expenses and a low base for product profit margins, despite a slowdown in same-store sales growth. It maintained its 'Buy' rating and a target price of 185,000 won.
In a report on the 17th, Myung-joo Kim, an analyst at Korea Investment & Securities Co., Ltd., projected BGF Retail Co., Ltd.'s consolidated sales for the third quarter to rise 2.5% year-on-year to 2.5226 trillion won, and operating profit to increase by 10.1% to 107.5 billion won. The operating profit margin was forecast at 4.3%. The growth rate of same-store sales in the third quarter was expected to remain in the 1% range.
This is due to the decrease in store visitors as the comparison standard was raised with the payment of livelihood support funds twice in July and September of last year, and as the demand for overseas travel by domestic residents recovered in August and September of this year.
Last year, same-store sales growth improved from -2.1% in the second quarter to -0.2% in the third quarter, and recorded 2.6% in July of last year. Analyst Myung-joo Kim predicted, "Since the slowdown in same-store growth was somewhat anticipated, operating profit will meet market expectations."
It was analyzed that the effect of reduced depreciation expenses would also support the increase in operating profit. BGF Retail Co., Ltd. opened nearly 1,000 stores annually from 2020 to 2023. The company explained that as a significant number of the stores opened during that period enter their fifth year of operation, the effect of reduced depreciation expenses is beginning to appear this year. The base burden on the profit margin on merchandise is also low.
Due to the payment of livelihood support funds in the third quarter of last year, tobacco sales increased by 1.6% compared to the same period of the previous year, and as the share of tobacco sales rose by 1 percentage point, the average product profit margin fell by 0.5 percentage points.
Analyst Myung-joo Kim assessed, "Because the base for product profit margins is low, product profit margins will not decline year-on-year this year, even if same-store growth is somewhat disappointing." He evaluated that the possibility of a further decline in the valuation of the convenience store sector is limited.
The market share of the convenience store channel in the retail industry fell from 6.6% in 2022 to 6.2% in 2025. Analysis suggests that while department stores and online channels grew steadily, the convenience store market share declined as the number of stores decreased, primarily among smaller operators.
Recently, the rate of decline in the number of convenience store outlets has been slowing down.
Analyst Myung-joo Kim stated, "Accordingly, we do not expect BGF Retail Co., Ltd.'s valuation to fall further," but added, "Since the number of stores across the industry has not yet returned to an upward trend, it will take time for the valuation to recover."
Korea Investment & Securities Co., Ltd. applied a 12-month forward earnings per share (EPS) and a target price-to-earnings ratio (PER) of 11.6 times to the target price calculation.
Analyst Myung-joo Kim predicted, "While the recovery in valuation will be slow, the stock price will gradually recover, driven by stable earnings improvements."

[email protected] Lee Jeong-hwa Reporter