Samsung Securities on the 16th said SILICON2 is a direct beneficiary of K-beauty exports from a profit perspective and is expected to be re-rated once Middle East uncertainty eases. It maintained a Buy rating and a target price of 63,000 won. SILICON2's previous day's closing price was 46,800 won.
Since the Middle East war broke out, SILICON2's share price has undergone a correction on concerns about higher freight rates and lower Middle East sales. Recently, the stock has been recovering. That is because international oil prices, which had surged, fell, and expectations grew for U.S.-Iran cease-fire talks. In addition, regardless of the war, resilient exports to Europe and the United States also helped.
Samsung Securities forecast SILICON2's first-quarter sales and operating profit this year at 345.1 billion won and 63.8 billion won, up 40.5% and 33.7% from a year earlier. That slightly exceeds the consensus.
Lee Ga-young, an analyst at Samsung Securities, said, "Excluding the Middle East, where operations were temporarily disrupted by the war, sales in all regions grew from the previous quarter," and added, "Major brands, including Medicube, Beauty of Joseon, Dr.Althea, Anua, and BIODANCE, are all growing steadily without surprises."
In particular, Europe, which will account for 41% of sales, was expected to lead growth again this quarter with sales up 75% from a year earlier. The United States, which will account for 21% of sales, was also expected to continue an encouraging growth trend, with sales up 59% year over year.
The analyst noted, "Because it is the most directly affected by higher freight rates within the cosmetics value chain, SILICON2's share price corrected sharply after the war broke out," but added, "SILICON2 remains the biggest beneficiary of K-beauty export growth from a profit perspective."
The analyst added, "Interest is warranted this year from the standpoint of benefits from solid exports to Europe and the United States," and said, "Even factoring in lower margins, the upside is sufficient."