LG Household & Health Care Hits Intraday Record High
Amorepacific Sees Sharp Sales Surge on Guanggunje
Boosted Expectations for Color Cosmetics
Bright Outlook for Q4 Earnings
[Asia Economy Reporter Oh Ju-yeon] Since November, domestic cosmetics stocks have shown remarkable price increases. This is due to the significant boost from China’s largest shopping festival, the Guanggunje, as well as expectations for a recovery in demand for color cosmetics lines following the development of COVID-19 vaccines. Fourth-quarter earnings are also expected to increase compared to the previous year, raising hopes for future stock price gains from a fundamental (corporate performance) perspective.
According to the Korea Exchange on the 13th, LG Household & Health Care’s stock price rose 4.96% from 1,531,000 KRW on the 2nd to 1,607,000 KRW as of the closing price on the 12th, while Amorepacific’s price increased 11.99% from 158,500 KRW to 177,500 KRW during the same period. Notably, LG Household & Health Care reached an intraday high of 1,648,000 KRW on the 12th, setting a new 52-week high. This was thanks to investor sentiment reviving on news that K-beauty products sold like hotcakes during this Guanggunje.
As China’s consumer sentiment, which had been suppressed due to COVID-19, exploded, LG Household & Health Care’s luxury cosmetics brand sales recorded 1.55 billion yuan (approximately 260 billion KRW), a 174% increase compared to the previous year, achieving the highest sales ever. The herbal cosmetics brand “Whoo” sold 205.1 billion KRW worth (181%) during the Guanggunje period, ranking third in luxury cosmetics brand sales behind Est?e Lauder and Lanc?me, while “Su:m37” grew by 92%.
Amorepacific’s Guanggunje sales also increased significantly. Sulwhasoo sold 16.8 billion KRW worth within 10 minutes of pre-orders, with sales rising 174% year-on-year, and Hera grew by 100%. Due to this consumer frenzy, Amorepacific’s sales during this Guanggunje doubled compared to the previous year.
Consequently, fourth-quarter earnings forecasts are also positive. According to financial information provider FnGuide, LG Household & Health Care’s operating profit for the fourth quarter, estimated by three or more securities firms, is expected to increase by 6.7% year-on-year to 257.1 billion KRW. Amorepacific’s operating profit is projected to rise slightly by 0.6% from 45.9 billion KRW last year to 46.2 billion KRW, and Korea Kolmar is also expected to increase by 0.6%.
In particular, there is growing optimism that color cosmetics such as eyeliners and lipsticks, which had not been used much due to the use of droplet-blocking masks, can be brought back following the development of COVID-19 vaccines, boosting the performance of companies strong in the color cosmetics sector. Clio, a specialized color cosmetics company, is expected to see its fourth-quarter operating profit increase by 7.8% year-on-year to 4.6 billion KRW. Reflecting this, its stock price rose 11.78% from 15,700 KRW on the 2nd to 17,550 KRW as of the closing price on the 12th.
In the securities industry, there is an assessment that the performance of domestic cosmetics companies could improve next year along with the recovery of duty-free shops.
Seong Jun-won, a researcher at Shinhan Financial Investment, analyzed, “Due to COVID-19, duty-free shop sales sharply declined in the first half of this year, but from summer, despite a two-week self-quarantine, the sales of duty-free shops by peddlers rebounded quickly.” He added, “There is a high possibility that domestic cosmetics companies’ operating profits will improve next year.” Mi-jin Cho, a researcher at NH Investment & Securities, explained, “The rise in the cosmetics sector index is moving in line with the overall stock market rebound.” She further expressed, “Since November includes Guanggunje, a high level of rebound is also possible.”
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