[Click eStock] "Cosmax, 4Q Earnings Surprise... Confirming Growth Potential"

[Asia Economy Reporter Song Hwajeong] Korea Investment & Securities evaluated that Cosmax confirmed its growth potential by recording a surprise earnings performance in the fourth quarter of last year and maintained a 'Buy' investment rating and a target price of 97,000 KRW on the 21st.

Na Eunchae, a researcher at Korea Investment & Securities, said, "The fourth quarter results of last year can be summarized as confirming growth potential amid qualitative improvement," adding, "The trend of profitability improvement in the Korean corporation, the ability to acquire new customers in the Chinese corporation, and the confirmation of growth potential in Southeast Asia are encouraging."

Cosmax recorded sales of 353 billion KRW and operating profit of 16.9 billion KRW in the fourth quarter of last year. Sales increased by 7% compared to the same period last year, and operating profit surged by 67%, exceeding consensus by 54%. Researcher Na analyzed, "The main factors for the earnings surprise were the improvement in domestic profitability and the improvement in Chinese performance," adding, "Domestic sales increased by 9% to 184.7 billion KRW, and operating profit increased by 145% to 13.2 billion KRW, significantly improving profitability." She continued, "The combined sales in China reached 151.2 billion KRW, increasing by 11% year-on-year, turning to an upward trend after three quarters, and the Shanghai corporation's operating profit also turned around," adding, "Southeast Asia sales increased by 91% to 17.1 billion KRW, accounting for only 5% of sales but recording the highest growth." On the other hand, combined sales in the Americas decreased by 14% to 17 billion KRW, and operating losses are estimated to have continued.

Due to the impact of the novel coronavirus (COVID-19), earnings in the first quarter of this year are expected to decline inevitably, but recovery is expected from the second to third quarters. Researcher Na explained, "The local business in China is under the influence of COVID-19, so the operating profit of the Chinese corporation and overall performance in the first quarter is estimated to decrease by 23% to 10 billion KRW, making a decline inevitable," adding, "However, a rapid recovery is expected from the second to third quarters, and even if the timing is delayed, concerns about Cosmax's research and development (R&D), sales and production capabilities, and management capabilities are considered to have been alleviated."