NH Investment & Securities said on the 5th that COSMECCA KOREA Co. is expected to set a record for its biggest results next year since listing, driven by balanced sales growth at its three units in Korea, the United States and China. It initiated coverage with a Buy rating and a target price of 98,000 won. Cosmecca Korea's previous closing price was 67,700 won.
NH Investment & Securities cited as key investment points for COSMECCA KOREA Co. the growth in orders and sales based on indie clients at the Korea unit, and two indie brands posting high growth in North America.
In particular, it said the two indie brands growing rapidly in North America have together accounted for well over 10% of sales over the past two years and have taken root as COSMECCA KOREA Co.'s main clients.
Researcher Jeong Ji-yun at NH Investment & Securities said, "The cleansing oil and cushion of the brands are representative K-beauty items and key products manufactured by COSMECCA KOREA Co.," adding, "Given the marketing characteristics of the cosmetics market, where virality on TikTok and YouTube translates into market share gains, distinctive formats such as peeling shot and jelly mist are drawing consumer attention."
Accordingly, the average selling price increase at the Korea unit is expected to continue contributing to improved profitability. Jeong said, "The current share price also carries a valuation advantage," adding, "We expect the market capitalization to grow to 1 trillion won."
Jeong projected that on a consolidation basis next year, COSMECCA KOREA Co. will achieve sales of 719 billion won and operating profit of 101.6 billion won. These represent growth of 16% and 21%, respectively, from a year earlier.
Jeong said, "Based on balanced sales growth at the Korea, U.S., and China units, the company is expected to renew its record for consolidated results since listing," adding, "With expansion in orders for new formats and new brands, standalone sales will improve to 500 billion won."
It said the China unit, which underperformed this year, is expected to turn around through a reorganization of its sales network. It also projected that the U.S. unit's earnings visibility will improve compared with the past.