[Into the Stocks] Why Global Home Appliance Companies Are Seeking 'CTK Cosmetics'

Global Manufacturers Visit CTK Cosmetics
Exploring Use of 'Popinborder' for Entry into Korean Market
Own Brand 'Serumkind' Enters Largest US Home Shopping Channel
Introducing Microplastic-Free Cosmetic Containers Soon

Jung In-yong, CEO of CTK Cosmetics

[Asia Economy Reporter Junho Hwang] "You can buy iHerb products on Gmarket"

Kim Young-sun, who used to purchase American supplements directly through iHerb and receive them via a forwarding service, recently discovered that iHerb products can also be purchased through Gmarket and Auction (eBay). The prices are similar, and products can be received within a week.

Incorporating Overseas Manufacturers' Korean Branches into the 'Platform'

This is the result of connecting iHerb with domestic e-commerce through 'PopinBorder,' a platform developed by the Korean company CTK Cosmetics (CTK). Overseas home appliance and toy companies, witnessing iHerb's successful establishment, are negotiating with CTK to enter the Korean e-commerce market. Domestic e-commerce companies competing with Gmarket and eBay have also started discussions to bring in overseas brands.

PopinBorder, launched by CTK's US subsidiary CTK eVision, is a customized platform that acts as a bridge connecting overseas product suppliers with domestic sellers. From the perspective of overseas manufacturers, it resolves difficulties related to brand management, product inventory, and price control caused by poor sales after entering the Korean market. Domestic consumers can receive overseas headquarters' products at similar prices within a short time.

A major advantage is the ability to implement services tailored to the needs of overseas suppliers. In the case of iHerb, it is linked with Korea's Ministry of Food and Drug Safety to automatically filter out products that are difficult to sell domestically.

In the first half of this year, 'PopinBorder' will advance one step further. CTK plans to provide fulfillment services for overseas direct purchase volumes based on the 'CTK Fulfillment Center' located in California, USA. If you purchase iHerb products on Gmarket, you will be able to receive them within 2-3 days. Additionally, CTK plans to offer online marketing and customer service such as exchanges and refunds in Korea. Through this, when exchanging products, customers will not receive items from domestic warehouses but rather products freshly produced by the headquarters.

CTK stated, "We aim to sign contracts with about 10 global brands (suppliers) within the year and to connect with all major domestic e-commerce platforms."

Expectations for the Cosmetics Platform This Year

Serumkind, an in-house brand product created by a subsidiary of CTK Cosmetics

CTK, which developed PopinBorder, primarily operates in cosmetics manufacturing, as its name suggests. What differentiates it from other companies is that it does not own a factory. From cosmetics planning to raw material development, package design, marketing, production, and logistics, all services are provided within the platform. It has already completed the 4th industrial revolution of cosmetics manufacturing. Recently, it also launched CTK CLIP, a platform that allows anyone to easily create a cosmetics brand or produce products. Currently, negotiations for cosmetics manufacturing using this platform are underway in various regions including the US and Africa.

It is well known in the global industry as a cosmetics platform company. Clients include Chanel, Dior, Bobbi Brown, L'Or?al, and Est?e Lauder. CTK started as Taega Trading, which developed and sold cosmetic containers for 38 years, and transformed into a full-service cosmetics company, entering the KOSDAQ in 2017.

Last year's performance declined significantly. The cosmetics business was heavily impacted by COVID-19. Operating profit was 527 million KRW, down 86% from the previous year. Additionally, investments in developing eco-friendly cosmetic containers without microplastics further reduced operating profit. Especially, since over 90% of CTK's total sales come from overseas, foreign exchange losses occurred, resulting in a net loss of 2 billion KRW. However, sales reached 124.198 billion KRW. On a net sales basis excluding internal transactions, this represents a 6.76% increase compared to the previous year.

A notable point in last year's business report is inventory assets. The company's inventory assets amounted to 17.792 billion KRW. Since full-service cosmetics means developing and supplying products on behalf of global brands through an original equipment manufacturing/ original design manufacturing (OEM/ODM) model, low inventory is generally expected. Regarding this, CTK cited products awaiting shipment due to the absence of shipping space on trans-Pacific routes (worth 4.5 billion KRW) and inventory increases due to e-commerce sales growth (from 5.6 billion KRW to 36.4 billion KRW) as causes. This could be a sign of expected performance expansion post-COVID or with economic recovery. According to the industry, CTK's subsidiary Completion's own brand 'Serumkind' is scheduled to enter QVC, the largest home shopping network in the US, within the first half of this year.

Jung In-yong, CEO of CTK Cosmetics, explained, "We are currently in the early stages of commercializing eco-friendly new material containers developed in collaboration with renowned overseas universities," adding, "We are also preparing a roadmap at the practical level to continuously promote such ESG management."

As of the 1st, CTK's stock price is 9,930 KRW. It rose to 12,700 KRW (closing price on the 25th) last month due to a free share issuance. Mirae Asset Securities highlighted the cosmetics business in a November report last year, emphasizing the importance of establishing a foothold in the US market. Shin Young Securities, in a February report, viewed the cosmetics business segment as attractive due to the potential for relatively high margins by growing alongside small and medium-sized brands, and noted the positive trend of decreasing deficits in the distribution segment each quarter. However, neither securities firm set a target price.