Small and mid-cap cosmetics stocks are rallying. Analysts say the K-beauty craze, along with expectations for the lifting of China’s ban on Korean cultural imports, has led to improved financial performance for small and mid-cap cosmetics companies, impacting their stock prices. Domestic indie brands like PharmaResearch and MA:NYO, which have penetrated overseas niche markets, and the Original Design Manufacturers (ODM) that support them have seen their stock prices rise.
However, stock prices of large cosmetics companies, such as Amorepacific Corporation and LG H&H, are surprisingly not performing well. There are assessments that the export strategies of these large firms, which have entered the highly competitive market of basic products, are unclear.
According to the Korea Exchange, as of the 28th, PharmaResearch's stock price has risen by 20.49%, MA:NYO's by 20.57%, and VT's by 4.96% compared to the end of January this year. ODM companies COSMAX (4.19%) and Kolmar Korea (2.33%) also showed upward trends in their stock prices.
Recently, the preference for small and mid-cap cosmetics stocks is also prominent in exchange-traded funds (ETFs). The 'SOL Cosmetics TOP3 Plus' launched by Shinhan Asset Management last month allocated more than half of its weight to small and mid-sized companies such as COSMAX (22.97%), SILICON2 (17.85%), Kolmar Korea (7.62%), APR (7.54%), VT (5.72%), and Cosmecca Korea (5.35%).
In the 'TIGER Cosmetics' ETF by Mirae Asset Global Investments, the largest weighted stock is PharmaResearch (11.92%). PharmaResearch is known for its flagship product, the beauty medical device Rejuran, and has large compositions of small and mid-cap stocks like COSMAX (11.1%), APR (10.53%), and Kolmar Korea (10.33%).
The trend of improving performance for small and mid-cap cosmetics companies has led to rising stock prices. Kolmar Korea, COSMAX, and VT recorded their largest-ever performances in the fourth quarter of last year. Both Kolmar Korea and COSMAX surpassed 2 trillion won in sales for the first time last year.
Expectations for the lifting of the ban on Korean cultural imports by the Chinese government have also been analyzed as a positive factor for cosmetics stocks. Reports have emerged that the Chinese government plans to send a cultural delegation to Korea as early as next month. The anticipation has grown that the two countries might resume official exchanges after eight years. Cosmetics stocks are seen as representative beneficiaries of the lifting of the ban.
However, not all cosmetics stocks are showing vitality. Large cosmetics stocks are rather stagnating. Amorepacific Corporation, which holds the largest market share in the domestic cosmetics sector, has seen its stock price drop by 9.6% this month. LG H&H's stock price has risen, but unlike major small and mid-cap stocks that recorded double-digit increases, it has only risen by 4.07%.
Securities firms are lowering their expectations for large cosmetics companies. In just this month, eight securities firms, including Samsung Securities, Daishin Securities, Heungkuk Securities, Yuanta Securities Korea, Eugene Securities, Hyundai Motor Securities, Sangsangin Investment & Securities, and Shinhan Investment Corp., have lowered the target stock price for LG H&H.
Experts cite competitive structure as the background for the contrasting stock price trends between large and small-cap stocks. Lee Ji-won, a researcher at Heungkuk Securities, noted, “Large companies are effectively playing the role of latecomers in overseas markets that small indie brands have already established,” adding, “As competition among domestic cosmetic products has intensified on platforms like Amazon, growth has slowed.”
The researcher added, “While large companies are targeting the already crowded basic product market, PharmaResearch and VT are growing rapidly by aiming at niche markets with their unique products, Rejuran and Lidelshot, respectively. Even though last year’s fourth-quarter performance wasn’t bad, the high market expectations for large companies have resulted in poor stock prices.”