[Click eStock] "Cosmax, Expecting Differentiated Earnings Growth Amid Weak Market Conditions"

[Asia Economy Reporter Oh Ju-yeon] Hanwha Investment & Securities analyzed on the 13th that although Cosmax's business conditions are sluggish due to the impact of the novel coronavirus infection (COVID-19), differentiated earnings growth is expected.

Cosmax's consolidated sales for the second quarter of this year are expected to be 347.4 billion KRW, and operating profit is expected to increase by 4.5% and 30.6%, respectively, compared to the same period last year. Domestic sales are 205.6 billion KRW, and although the business environment remains unfavorable, it is expected to achieve a favorable growth rate through securing new volume.

The Chinese market is also expected to recover sales, escaping from the COVID-19 impact in the previous quarter.

Researcher Son Hyo-joo said, "Shanghai sales are expected to be 95.6 billion KRW (7.7%), and Guangzhou sales 37.4 billion KRW (27.4%)," adding, "Growth potential is still expected to be higher in the Guangzhou corporation, which has a high proportion of online customers."

However, growth rates in the U.S. and Southeast Asia are expected to slow down. Researcher Son analyzed, "U.S. USA sales are expected to be 12.3 billion KRW (-40.0%), NuWorld sales 12.0 billion KRW (-30.0%) due to the full-scale spread of COVID-19 in the second quarter, and Indonesia sales are 9.1 billion KRW (10.0%), Thailand sales 4.4 billion KRW (20.0%), showing that the impact of recent COVID-19 spread is becoming visible in Southeast Asia as well."

However, since the performance proportion of the U.S. corporation is lower than that of the domestic and Chinese corporations, it was emphasized that the performance improvement of the domestic and Chinese corporations will have a greater impact on the overall company’s performance improvement.

Under these circumstances, the operating profit growth of the domestic corporation is expected to continue throughout this year.

Researcher Son said, "In the case of Cosmax, the duty-free channel proportion is absolutely low, and it is expected to continue earnings growth by expanding the proportion of online customers in Korea and China," adding, "Based on solid earnings growth momentum, we maintain a 'Buy' investment opinion and a target stock price of 132,000 KRW."