How are energy investors positioned?
On Tuesday, Goldman Sachs revised its stance on E-Mart (139480:KS), downgrading the stock from Neutral to Sell and adjusting the price target to KRW 71,000 from KRW 74,000. The decision followed E-Mart’s share price surge by approximately 40% after its fourth quarter results in 2024, where the company forecasted a significant earnings recovery for 2025. This optimistic outlook was based on anticipated cost reductions and a robust rebound in same-store sales growth (SSSG).
Despite E-Mart’s emphasis on profitability and shareholder returns, Goldman Sachs expressed caution regarding the company’s future. The firm pointed out that E-Mart’s ambitious goals depend heavily on several external factors aligning favorably. In the first quarter of 2025, E-Mart reported better-than-expected operating profits, attributed to stringent cost control. However, the hypermarket’s SSSG did not meet expectations, recording a year-over-year decline of 0.6%, contrary to Goldman Sachs’ projection of a 0.5% increase.
The negative trend in SSSG continued into the second quarter, with April figures showing a further year-over-year decline of 2.6%. While E-Mart expects an uptick in the second half of 2025, citing a macroeconomic recovery and easier comparisons as key drivers, Goldman Sachs remains skeptical. The reliance on external circumstances, rather than internal strategies, for top-line growth leads to an uncertain outlook, according to the firm.
Goldman Sachs has consequently revised its earnings estimates for E-Mart. With the new target price set at KRW 71,000, implying a next twelve months price-to-earnings ratio of 12 times, the firm sees a 16% downside risk to the current stock price. This assessment prompted the downgrade to a Sell rating, as the risk-reward balance appears to lean towards the downside.
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