Amorepacific Q3 operating profit up 25% on improved domestic profitability; target price: 180,000 won

[Financial News] Meritz Securities maintained its Buy rating and target price of 180,000 won for Amorepacific, saying the company would continue to grow steadily on the back of improved profitability in its domestic business and a diversified brand portfolio.
Park Shin-ae, an analyst at Meritz Securities, said in a report on the 30th that “low sensitivity to exchange rates and steady earnings improvement are factors that enhance the company’s investment appeal in the current market environment,” and recommended a Buy approach.
Amorepacific posted consolidated revenue of 1.1295 trillion won for the third quarter of this year, up 11.1% year over year, and operating profit of 115.2 billion won, up 25.4%. Operating profit was 1.0% below market forecasts but largely in line with expectations. The operating margin rose 1.2 percentage points from a year earlier to 10.2%.
The domestic business led the improvement in earnings. Domestic revenue and operating profit rose 12% and 42%, respectively. The operating margin increased 3.0 percentage points to 13.6%, exceeding securities firms’ estimates. Sales rose across most distribution channels, while a key factor was an 18% increase in high-margin duty-free sales as more foreign visitors came to Korea.
U.S. revenue rose 17%, but operating profit was estimated to have fallen by around 40% due to increased digital investment. Innisfree and AESTURA posted strong growth, while Laneige, which accounts for about 30% of U.S. revenue, continued to see sales decline.
Greater China revenue fell 2%, but the company remained profitable at the operating level. Revenue in Europe, the Middle East and Africa (EMEA) and other parts of Asia rose 10% and around 20%, respectively, supporting overall growth. Foreign-exchange-related losses resulting from the weak won led to a non-operating loss of 44.2 billion won.
Meritz Securities forecast Amorepacific’s revenue this year at 4.7143 trillion won and operating profit at 493.8 billion won, up 10.9% and 47.1%, respectively, from a year earlier. It expects the operating margin to reach 10.5%, returning to double digits for the first time in nine years.
“Revenue and earnings have improved steadily every year since hitting a low in 2023,” Analyst Park said. “Revenue is spread across multiple brands, countries and channels, and growth has been balanced across several business segments, making the earnings structure much more stable than in the past.” She added that the growth strategy centered on derma cosmetics and hair care was also progressing smoothly.
Amorepacific expects its domestic business to account for 53% of total revenue and 62% of operating profit this year, giving it lower sensitivity to exchange rates than other cosmetics companies. The stock currently trades at around 18.6 times its 12-month forward price-to-earnings ratio (PER).
Analyst Park said, “Revenue growth and improved profitability in the domestic business are providing a floor for company-wide earnings,” adding that “given its position as a multi-brand company with a diversified brand portfolio, valuation concerns are also limited at current levels.”
[email protected] Lee Jeong-hwa Reporter