[Click eStock] "Amorepacific, Luxury Segment Strong... Investment Rating Upgraded to Buy"

Ebest Investment & Securities Report
Positive Outlook on Strengthening Luxury Sector and Online Channels

[Asia Economy Reporter Minji Lee] Ebest Investment & Securities adjusted its investment opinion on Amorepacific to "Buy" on the 29th while maintaining the target price at 190,000 KRW. This decision is based on the expectation of improved performance due to the results focused on the luxury sector and digital channels.

In the third quarter, Amorepacific recorded sales of 1.0886 trillion KRW, down 22.4% year-on-year, and operating profit of 56 billion KRW, a decrease of 47.9%. The operating profit exceeded market expectations due to strong online sales channels and cost efficiency.

Domestic cosmetics business sales amounted to 534.3 billion KRW, down 31.5% from the previous year. Due to the ongoing impact of COVID-19, duty-free sales decreased by 49.3% compared to a year earlier, recording 220 billion KRW.

Amorepacific is focusing on the digital sector to respond to the online consumption trend caused by COVID-19. Orin Ah, a researcher at Ebest Investment & Securities, said, “We are investing about 50-60% of marketing costs in digital,” adding, “Domestic e-commerce sales increased by 40% year-on-year, showing gradual results of the strategy.”

Sales in the Asia segment recorded 394.3 billion KRW, down 12.8% from a year earlier. Operating profit was 15.7 billion KRW, achieving a turnaround to profit from the previous quarter due to cost control. Sales in China showed a decline in the low teens based on localized sales, with the Innisfree brand in China experiencing a drop to the high 20% range in sales due to store closures. However, Sulwhasoo grew by more than 20%, and the online growth rate of luxury brands reached 80%.

China is in a transition phase where growth led by Laneige and Innisfree is shifting towards luxury leadership. Researcher Orin Ah stated, “We need to monitor brand performance related to the Singles’ Day event,” and explained, “Hong Kong saw a sales decline of about 40% based on localized sales due to a decrease in tourists, while the North American and European segments experienced sales declines year-on-year due to the impact of COVID-19 and adjustments in offline channels.”