[Click eStock] Kolmar Korea, Q2 Operating Profit Expected to Drop 20%... "Growth Turnaround in Second Half"

Meritz Securities Report
Q3 Cosmetics Sector Improvement and CKM Listing 'Positive'

[Asia Economy Reporter Minji Lee] Meritz Securities on the 10th issued a buy rating and a target price of 53,000 KRW for Hankook Kolmar. Although the core cosmetics division is expected to experience negative growth due to a lack of new orders and the impact of COVID-19, performance improvement is anticipated starting from the third quarter.

Hankook Kolmar is estimated to have recorded sales of 382.2 billion KRW and operating profit of 30.5 billion KRW in the second quarter, down approximately 7% and 20% respectively compared to the same period last year.

By division, the cosmetics segment is expected to see domestic sales of 167.2 billion KRW and operating profit of 12.1 billion KRW, decreasing by 13% and 14% year-on-year. Hanuri, a researcher at Meritz Securities, said, "Domestic performance is expected to decline due to the absence of new orders and a negative base effect. The China segment, where operating rates have returned to normal, is projected to record an operating profit of 10.3 billion KRW from Beijing and Wuxi, an increase of 110% compared to the same period. However, North American sales are expected to decline due to the impact of COVID-19."

The pharmaceutical CKM (formerly CJ Healthcare) division is expected to record sales and operating profit of 135.5 billion KRW and 17.5 billion KRW respectively, both increasing by 5% compared to the same period last year. Although sales of raw materials for H&B and prescription performance were not smooth, K-CAB sales are estimated to have been favorable. The separate pharmaceutical performance of the domestic division is expected to be reflected through the second quarter of this year, with estimated sales of 49.9 billion KRW and operating profit of 8 billion KRW, up 5% and 8.4% year-on-year.

Researcher Hanuri explained, "With the negative base effect reflected in the core cosmetics business, growth is expected to resume from the third quarter. The sale of the separate pharmaceutical division and the listing of CKM are expected to alleviate debt burdens."