Why Kolmar BNH's Target Stock Price Was Lowered by Securities Firms Despite Strong Earnings

[Asia Economy Reporter Jang Hyowon] Kolmar BNH has announced strong fourth-quarter earnings, but securities firms are lowering their target stock prices.

Experts positively evaluate Kolmar BNH's growth potential and consider the current absolute stock price level to be at the bottom. However, they explained that the target price was lowered because the company is unlikely to achieve the initially expected performance forecast for this year.

According to the industry on the 20th, Kolmar BNH recorded sales of 157.3 billion KRW and operating profit of 26.4 billion KRW in the fourth quarter of last year, increasing by 46% and 31.5% respectively compared to the same period last year. However, it fell short of the market consensus operating profit average of 28.4 billion KRW.

By business segment, sales of health functional foods grew 33.5% year-on-year to 87.6 billion KRW. Although there was a slight decrease due to delayed repurchase timing caused by Atomy's second-quarter promotion, it normalized again in the fourth quarter. Cosmetics sales also increased by 33.2% to 36.7 billion KRW during the same period.

Sales in China were 17.1 billion KRW, showing negative growth compared to the third quarter, but total overseas sales grew 169.5% year-on-year to 53.1 billion KRW. This was due to strong exports to Taiwan, the United States, Malaysia, and others.

Sim Eunju, a researcher at Hana Financial Investment, said, "This year, Atomy's sales in China will fully drive Kolmar BNH's performance," adding, "Atomy is expected to raise the per-person sales limit, and portfolio expansion into other categories beyond health functional foods and cosmetics is anticipated."

Despite the expected strong performance, two out of three securities firms that issued reports after Kolmar BNH announced its results lowered their target prices. Daishin Securities lowered its target price from 90,000 KRW to 75,000 KRW. Shinhan Financial Investment also adjusted its target price down from 90,000 KRW to 82,000 KRW.

Han Kyungrae, a researcher at Daishin Securities, said, "The expected earnings per share (EPS) for this year was adjusted from 4,483 KRW to 3,739 KRW, which was reflected in the target price," and added, "Although the growth rate in the Chinese market is somewhat sluggish, the simultaneous growth of domestic and overseas sales and expansion into overseas markets are positive."

Yoon Changmin, a researcher at Shinhan Financial Investment, also said, "The earnings estimates for this year were adjusted, leading to a slight lowering of the target price," but analyzed, "However, the current stock price is only 13.2 times the expected price-earnings ratio (PER) for this year, so the absolute stock price is at a bottom level."