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Photo = Yonhap news |
[Alpha Biz= Paul Lee] Korea Investment & Securities has raised its target price for Amorepacific from KRW 170,000 to KRW 180,000, citing the company's diversified brand portfolio and anticipated tailwinds from South Korea’s pro-market policy stance in the second half of 2024.
Analysts Myungjoo Kim and Yoona Jeon noted, “While Amorepacific’s broad portfolio of brands may result in slower earnings recovery in some market conditions, it also positions the company for a valuation premium. We believe the cosmetics sector, along with the broader Korean equity market, will regain foreign investor interest in H2 due to active government stimulus efforts.”
For Q2 2024, Amorepacific is projected to report consolidated revenue of KRW 1.024 trillion and operating profit of KRW 72.2 billion, reflecting an operating margin of 7%. Operating profit is expected to fall about 6% below consensus estimates, although analysts believe this has already been priced in during the recent stock correction.
While COSRX continues to post weak performance in Q2 following a subdued Q1, robust growth from Laneige in North America (+11% YoY) and Europe (+28% YoY) is expected to offset the drag.
Amorepacific’s China operations are also showing signs of structural improvement, with mainland China revenue projected to grow by approximately 20% YoY due to a low base effect, and duty-free sales expected to rise around 10%. The China business is expected to maintain break-even profitability in Q2, following similar performance in Q1.
Despite a recent decline in South Korea’s cosmetics exports to China, analysts emphasized that "upside risk" still exists for the Chinese market. “Should the Chinese cosmetics industry recover in the second half, Amorepacific’s operating margin could improve significantly through enhanced performance in its China subsidiary,” the report stated.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
