COSMAX is showing strong gains early in the session on expectations of a turnaround to profit at its U.S. subsidiary and improved earnings in the second half.
At 9:35 a.m. on the 6th, COSMAX was trading at 182,500 won on the Korea Exchange, up 14,200 won (8.44%) from the previous session.
The share-price strength is seen as being driven by positive earnings outlooks from the securities industry.
Park Jong-dae, a researcher at Hana Securities, issued a report that day with a "buy (BUY)" rating on COSMAX and a target price of 230,000 won.
Park said, "It is encouraging that the U.S. subsidiary is expected to turn profitable as its sales scale increases," adding, "Starting in the second quarter, profitability in the second half is expected to improve significantly."
Hana Securities projected COSMAX's consolidated second-quarter revenue at 744 billion won and operating profit at 69.6 billion won. That would be up 19% and 14%, respectively, from a year earlier.
It also expected growth at overseas subsidiaries to continue along with the domestic headquarters. Domestic revenue is projected to increase 15% year over year, while revenue at the China and U.S. subsidiaries is estimated to rise 21% and 50%, respectively. The Indonesia and Thailand subsidiaries are also expected to grow 30% and 10%, respectively, contributing to improved results.
In the second half, normalization of overseas operations and a better product mix are expected to lift profitability.
Park explained, "Operations in the United States and Southeast Asia are normalizing, and the slump in the color cosmetics category has bottomed," adding, "As sales of base categories, including domestic hydrogel masks, expand, both the product mix and profitability are improving."
Jung Ji-yun, a researcher at NH Investment & Securities, also said, "In June, Korea's cosmetics exports hit an all-time high, and we believe the earnings trend of major player COSMAX cannot diverge from this," adding, "With an easy earnings base for the separate entity in the second half, double-digit growth in U.S. and China sales in the first half, and a shift to profitability at the U.S. subsidiary starting in the second quarter, earnings visibility has improved."