[Click eStock] "AmorePacific Expected to Improve Performance After 5 Years"…Target Price Raised to '300,000 Won'

[Asia Economy Reporter Ji Yeon-jin] IBK Investment & Securities announced on the 13th that it expects Amorepacific's luxury cosmetics, centered on Sulwhasoo, to show performance improvement for the first time in five years due to strong sales and recovery of duty-free shops and department stores since last year, raising the target stock price by 300,000 KRW.

Amorepacific's sales in the first quarter of this year are projected to increase by 4.7% year-on-year to 1.1842 trillion KRW, with 869.1 billion KRW (6.2%), operating profit of 140.1 billion KRW (129.7%), and net profit of 96.1 billion KRW (43.1%). Domestic sales are estimated to decline by -3.6% (cosmetics -3.8%), but recovery is expected across domestic channels with duty-free shops up by +5% (market estimated at +0.1%), department stores down by -5%, door-to-door sales down by -6%, and Aritaum down by -15%. The duty-free industry in the first quarter is expected to recover to last year's level, while Daily Beauty & O'Sulloc are expected to see a store reduction of -2.5%.

Overseas sales are expected to increase by 21.0% year-on-year, with Asia up 24%, Europe up 9%, and North America down 28%. China is analyzed to have a possible turnaround in offline sales following online growth. In particular, overseas operating profit margin is also estimated to rise to 10.7% (Asia 10.8%) compared to the previous year, with an increase in luxury sales within department stores due to offline recovery in China.

Ji-young Ahn, a researcher at IBK Securities, said, "Amorepacific's turnaround is becoming visible this year," adding, "Duty-free shops are improving compared to the market, and the recovery of Sulwhasoo's premium identity and expansion of large trading partners are concrete. Also, as of last year, digital strategies have been confirmed in both domestic and Chinese markets." The digital ratio in the fourth quarter of last year reached a record high of 20% domestically and 60% in China. Sulwhasoo achieved triple-digit growth and ranked 7th in luxury skincare during nationwide shopping events in China.

Amorepacific's consolidated operating profit peaked at 772.9 billion KRW in 2015 and 848.1 billion KRW in 2016, then declined for four consecutive years. Since 2015, performance decline and stock price drops continued due to delayed luxury marketing and digital response compared to competitors.