DAISHIN SECURITIES on the 15th said COSMAX's third-quarter results are expected to fall short of market expectations (consensus). Despite the spread of K-beauty's popularity, weakness in the domestic market and the Indonesia market is the reason. Accordingly, it cut the target price to 280,000 won from 300,000 won and maintained a "buy" investment rating.
COSMAX's third-quarter revenue is estimated at 579.6 billion won and operating profit at 54.6 billion won. Both are expected to rise 9% and 26%, respectively, from a year earlier, but they are somewhat below market expectations (consensus).
The domestic subsidiary saw order contracts in Aug. come in weaker than expected, with standalone revenue estimated at 391.3 billion won, up 13% from a year earlier. Sales growth of some color cosmetics brands is slowing, and the skincare market is expected to drive sales growth. However, as sales of high-cost gel masks increased following the previous quarter, profitability improvement is expected to be limited.
For overseas subsidiaries, a slowdown at the Indonesia subsidiary is a concern. The Indonesia unit had posted high growth, but amid recent local economic uncertainty and intensifying competition in the low-priced product market, a contraction is expected. The U.S. subsidiary, which had been in the red, is expected to see existing clients recover and new brands come in, but given that most of the volumes are initial orders, the pace of sales growth is estimated to be limited.
However, with new brands entering and joint sales efforts in Shanghai, China, growth of 25% is expected, and the China subsidiary's revenue is projected to rise 18% to 135 billion won.
Jeong Han-sol, an analyst at DAISHIN SECURITIES, said, "The global spread of K-beauty and the growth of indie brands will continue to provide a favorable order environment for COSMAX," while adding, "Reflecting the slowdown in growth at the Indonesia subsidiary, which had recorded high growth, we are lowering our earnings estimates."