Aekyung Industrial, Earnings Rebound Expected... Gradual Upward Trend in Stock Price Anticipated

[Asia Economy Reporter Park Jihwan] Shinhan Financial Investment on the 7th raised its investment opinion to 'Buy' and increased the target price for Aekyung Industrial from 25,000 KRW to 28,000 KRW, a 12% increase, citing expectations of an export rebound starting from the fourth quarter of last year.

Seong Junwon, a research fellow at Shinhan Financial Investment, stated, "Aekyung Industrial's consolidated operating profit in the fourth quarter of last year was 2.8 billion KRW, down 83.2% compared to the previous year." Sales amounted to 153.6 billion KRW, and operating profit was 2.8 billion KRW, decreasing by 20.8% and 83.2% respectively year-on-year. This was largely due to poor performance in the cosmetics duty-free and other (H&B) channels. In particular, costs related to inventory disposal occurred due to the establishment of a new logistics center. By business division, operating profits were 5.2 billion KRW (-67.4%) for cosmetics and -2.4 billion KRW (turning to a deficit) for household goods.

Overseas sales of cosmetics performed well due to the effect of China's Singles' Day. Although sales of household goods held up thanks to the personal care brand, operating profit turned to a deficit due to seasonal factors related to holidays and increased marketing expenses. This year, consolidated operating profit is estimated to increase by 68.1% to 37.6 billion KRW compared to the previous year. Sales are expected to rise by 7.9% to 634.7 billion KRW, and operating profit is projected to increase by 68.1% to 37.6 billion KRW.

Researcher Seong said, "The recovery speed of cosmetics demand in duty-free shops and home shopping due to COVID-19 is still slow," adding, "Exports have shown a recovery trend for three consecutive quarters, which is a positive aspect, and there is high expectation for an annual export rebound of 10-20% this year."

Aekyung Industrial plans to enter offline sales by signing a business agreement with the Chinese local cosmetics brand 'Proya.' Researcher Seong forecasted, "We expect recovery in cosmetics exports to China and recovery in domestic duty-free and home shopping cosmetics sales after vaccination, and the stock price is likely to gradually trend upward."