[Click eStock] "Amorepacific, Momentum of Earnings Improvement Continues"

[Asia Economy Reporter Song Hwajeong] Daishin Securities maintained its 'Buy' rating and target price of 330,000 KRW for Amorepacific on the 16th, expecting the momentum for earnings improvement to continue.

Amorepacific's second-quarter earnings this year are expected to meet expectations. Daishin Securities estimated Amorepacific's consolidated sales for Q2 at 1.2325 trillion KRW and operating profit at 130.3 billion KRW. These figures represent increases of 17% and 270%, respectively, compared to the same period last year. Han Yujeong, a researcher at Daishin Securities, said, "The Q2 operating profit exceeds the previous Daishin Securities estimate of 124.5 billion KRW and aligns with the market consensus of 132.6 billion KRW."

Digital sales, a key domestic channel in Q2, are expected to increase by 33% year-on-year, and duty-free sales by 43%. Researcher Han analyzed, "Digital growth is at a similar level to the previous quarter, and duty-free growth is expected to improve compared to the previous quarter due to market recovery. However, due to pre-demand effects from major product price increases in the domestic duty-free channel at the end of Q1, it will slightly underperform the market."

Sales of Sulwhasoo in China are estimated to increase by 33%, slowing compared to the growth rate in Q1. Han said, "This is due to the base effect from the previous year, and it is judged that a stable growth trend continues in the increasingly competitive Chinese cosmetics market." He added, "Sales of Innisfree in China are expected to decrease by 5% due to accelerated closures of inefficient offline stores despite growth in online channels." The combined sales growth rate in China is expected to be 10%, and the operating profit margin 8%, showing improvement compared to the same period last year but a decline compared to the previous quarter. Han explained, "This is due to concentrated marketing expenses in Q2 and does not indicate a trend reversal." Sales in Europe and North America are expected to increase by 11% and 17%, respectively, due to the base effect from the previous year.

Although the stock price has recently been sluggish due to valuation burdens and concerns about a peak-out in Q1, the momentum for earnings improvement is expected to continue. Researcher Han said, "Following the faster-than-expected recovery of the domestic duty-free market, the recovery trend in overseas duty-free markets will also continue. Not only the consumption recovery after the pandemic but also the results of workforce and channel resource optimization and brand investments made during that period are expected to sustain the momentum for earnings improvement."