Amorepacific, Reasons for Raising Target Price Despite Q4 Losses

[Asia Economy Reporter Song Hwajeong] Amorepacific recorded a loss in the fourth quarter of last year, but securities firms have raised their target prices one after another, reflecting expectations for improved performance this year.

As of 9:15 a.m. on the 5th, Amorepacific was trading at 235,000 won, up 3,500 won (1.15%) from the previous day. It has shown a strong gain of over 1% for two consecutive days.

Due to the impact of COVID-19 and other factors, Amorepacific posted an operating loss of 9.2 billion won in the fourth quarter of last year, turning to a deficit. Sales amounted to 1.1569 trillion won, down 13.3% compared to the same period last year.

The rise in stock price despite the loss is interpreted as due to expectations for performance improvement this year. Securities firms also raised their target prices one after another reflecting this year's earnings forecasts. NH Investment & Securities raised its target price from 240,000 won to 310,000 won, and DB Financial Investment raised it from 250,000 won to 300,000 won. KB Securities set it at 270,000 won, Shinhan Financial Investment and KTB Investment & Securities at 260,000 won, Shin Young Securities at 250,000 won, and Samsung Securities at 241,000 won, with most securities firms raising their target prices.

Mi-jin Cho, a researcher at NH Investment & Securities, analyzed, "We raised the target price reflecting the upward revision of earnings estimates due to adjustments in overseas profitability improvement, expansion of valuation for cosmetic peers, and increased confidence in long-term performance improvement." She added, "Sulwhasoo showed higher-than-expected growth in the Chinese market, becoming the main brand with the largest share, proving the possibility of performance improvement."

However, there is an analysis that the upside potential is not high due to the recent stock price rise. Amorepacific's stock price has risen 12.38% so far this year until the previous day. Eun-kyung Park, a researcher at Samsung Securities, said, "The upside potential is only 6%, so we maintain a 'Hold' investment opinion," adding, "In a situation where uncertainties about COVID-19-related demand and concerns about intensified competition in China persist, caution is needed against excessive expectations." Hyundai Motor Securities also downgraded its investment opinion from 'Buy' to 'Marketperform' considering the limited additional upside potential following the stock price recovery.