Surge in orders in Korea and the U.S. ... Cosmax target price raised on outlook for record results

[The Financial News] LS Securities raised its target price for Cosmax by 14.3%, from KRW 350,000 to KRW 400,000, forecasting that the company will post record results in the third quarter on the back of strong order intake in Korea and the U.S. It maintained its 'Buy' rating.
Oh Rin-a, an analyst at LS Securities, said on the 8th, “Third-quarter results are expected to exceed previous estimates, with strong growth backed by solid order momentum in Korea and the U.S.” She added, “Strong growth is expected to continue in the fourth quarter as well, supported by a low base and solid order intake.”
LS Securities forecast third-quarter consolidated revenue of KRW 833.2 billion and operating profit of KRW 76.8 billion for Cosmax. These figures represent increases of 42.3% and 79.9%, respectively, from the same period a year earlier. Compared with its previous estimates, the firm raised its revenue forecast by 8.6% and its operating profit forecast by 7.0%.
The domestic subsidiary is expected to lead earnings growth. LS Securities expects the Korean subsidiary’s third-quarter revenue to reach KRW 559.9 billion, up 46% from a year earlier and above the company’s projected growth range of 35% to 40%. Operating profit is also expected to rise 79.6% to KRW 61.6 billion, with an operating margin of 11.0%.
Oh said, “As growth at major skincare clients accelerates compared with the first half, the share of basic skincare products is expected to rise from the previous quarter.” She added, “Color cosmetics are also expected to return to positive growth, thanks to new product launches and expanded promotions by major clients.”
She added, “Profitability in gel masks and margins on high-growth items such as essences and mists are also continuing to improve.”
Growth in the U.S. business is also expected to be rapid. Third-quarter revenue in the U.S. is forecast to rise 70% from a year earlier to KRW 62.7 billion. That is 21.3% above the previous estimate of KRW 51.7 billion. Operating profit at the U.S. subsidiary, which first turned profitable in the second quarter, is also expected to increase further on the back of top-line growth.
Oh said, “Revenue from indie clients is contributing far more than revenue from existing clients, while reorders of existing products and orders for new products are both increasing.” She forecast, “Demand for the development of skincare products such as toner pads, eye patches and hydrogel masks is also expanding, so growth will continue as the client base and product range expand.”
Revenue growth of at least 20% is also expected in China. The Shanghai subsidiary is forecast to grow by at least 30%, buoyed by new product launches from major color-cosmetics clients and the expansion of offline channels. Guangzhou is expected to grow by around 20%, on the strength of offline and export channels. Revenue in Indonesia and Thailand is also forecast to increase in the 30% range and the high 20% range, respectively.
Oh said, “Growth in domestic skincare is being complemented by a recovery in color cosmetics, and the U.S. business is further strengthening its profitable footing.” She added, “I believe the foundation for earnings growth is broadening.”
[email protected] Bae Han-geul Reporter