Daol Investment & Securities on the 3rd projected that growth in the China market for COSMAX will continue this year. Accordingly, it maintained its "buy (BUY)" rating and raised the target price to 240,000 won from 220,000 won. COSMAX's previous trading day closing price was 194,500 won.
Daol Investment & Securities estimated COSMAX's first-quarter sales this year at 623 billion won and operating profit at 52.6 billion won. That would be up 6% and 2%, respectively, from a year earlier.
By business segment, domestic sales are forecast to reach 404.8 billion won, up 12% from a year earlier, while sales at the China Shanghai subsidiary are projected to rise 10% to 119.5 billion won.
Park Jong-hyun, an analyst at Daol Investment & Securities, said of the first-quarter results, "Domestic sales saw weaker sales of hero products at key color cosmetics clients, but solid skincare is expected to offset that," adding, "In particular, derma cosmetics focused on ingredients and functions are likely to be strong."
Full-year sales are expected to reach 2.7 trillion won, with operating profit of 223.4 billion won. That would be about a 14% increase from the previous year.
Park noted, "In the first quarter this year, exports of basic cosmetics and other cosmetics based on Korea Customs Service standards rose 15% and 34%, respectively, from a year earlier, lifting expectations for overall earnings in the cosmetics sector," and said, "Overseas expansion by China cosmetics brands (C-beauty) color cosmetics companies will drive growth in the China subsidiary's results."
However, Park added, "If margin expansion at the domestic subsidiary gains traction, the company's profit growth will become more pronounced," and, "A higher proportion of skincare within the Korea subsidiary will underpin future improvements in operating profit margin (OPM)."