Korea Investment & Securities Co. projected that SILICON2(257720) will continue to deliver solid results in the second half, backed by an expanded distribution network in the United States and Europe. The improvement in profitability may be limited by a weaker dollar, but growing sales to major retailers in the United Kingdom and Europe are expected to partially offset that.
At the same time, it maintained a "buy (BUY)" rating and raised the target price to 65,000 won from 60,000 won.
Kim Myeong-ju of Korea Investment & Securities Co. said in a report on the 4th, "Thanks to steadily accumulating clients, SILICON2's results in the second half will be solid," but also noted, "If the trend of a stronger won continues, it could negatively affect SILICON2's results."
Kim noted that SILICON2's U.S. sales share in the second quarter rose 2.6 percentage points from the previous quarter to 19.2%. "The second-quarter gross profit margin (GPM) improved by 2 percentage points from the prior quarter, and more than 1 percentage point of that was due to a stronger dollar and increased U.S. sales," Kim said, adding, "Client diversification and lower discount rates also likely contributed about 0.5 percentage point of improvement."
However, with the won-dollar exchange rate down 12.9% from its peak, the third-quarter GPM is unlikely to exceed the second quarter's level. Instead, supported by a higher share of retailer sales, profitability is expected to improve compared with the first quarter.
Korea Investment & Securities Co. also focused on changes in SILICON2's client mix. In 2025, a higher share of wholesale clients worsened profitability, but now Boots, a major U.K. retailer, has become the largest client. With K-beauty growing more popular in the U.K., Kim projected that sales to Boots will increase in the second half. He added that sales to iHerb, which had been weaker than in the past, appear to be recovering recently.
The potential for expansion in the European market was also assessed positively. "Starting this year, placements of Korean cosmetics in European offline channels are gaining traction," Kim said. "SILICON2 is highly likely to win new clients across distribution channels under CVC Capital, including Douglas."
"The cosmetics sector could face a short-term correction in September, but SILICON2 has attractive valuation and will be a relatively safe investment," Kim said. "However, note that a prolonged stronger won could negatively affect results."