First Read: Korea Consumer "Update on news and our view; Limited impact ..."

Research evidence excerpt

First Read: Korea Consumer "Update on news and our view; Limited impact ..."

Valuation Method and Risk Statement

For the consumer sector, the key downside risks are faster-than-expected increases in oil and

raw material prices amid recent global geopolitical uncertainties, as well as potential

government pressure on pricing. They key upside risk would be a quicker-than-expected

recovery in demand driven by earlier rate cuts and an economic rebound.

Our price target for E-mart is based on target PE multiple. Key upside risks are: 1) a significant

economic improvement that could positively impact consumer spending; 2) an earlier-than-

expected completion of logistics and product sourcing integration between retail units; 3) a

faster-than-expected post-merger integration process for E-mart, Ebay Korea, SSG.com and

Starbucks; and 4) decreased competition, especially from e-commerce. Key downside risks

are: 1) larger than expected losses from construction and CVS divisions; 2) slower than

expected restructuring / integration process for offline platforms; and 3) unexpected

regulatory change in domestic retail industry.

Our price target for Shinsegae is based on a target PE multiple. The key downside risks include

1) unexpected political tensions 2) a sharp decline in equity / housing market prices 3) a

slower-than-expected duty-free margin recovery. Key upside risks include 1) faster-than-

expected domestic consumption sentiment recovery and 2) global rate cut cycle.

Samyang Foods: We base our price target on a target PE multiple.Key downside risks to our

view include, but are not limited to, unexpected quality issues for Buldak or other Samyang

products which could damage the brand equity; a spike in raw material costs; or maritime