[Click eStock] "Cosmax, Strong Performance in China... 2Q Operating Profit Expected to Grow 33%"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 28th that it maintains a buy rating and a target price of 170,000 KRW for Cosmax, citing continued strong performance of its Chinese subsidiary and an expected recovery in its U.S. subsidiary in the second half as additional momentum.

Cosmax is expected to report consolidated sales of 415.7 billion KRW in the second quarter of this year, a 10% increase year-on-year, and operating profit of 34.9 billion KRW, up 33%. This is expected to exceed the operating profit consensus of 28.1 billion KRW.

Han Yoo-jung, a researcher at Daishin Securities, said, "Excluding the duty-free channel, domestic cosmetics consumption remains sluggish, but increased exports to Japan and China by major clients are expected to drive top-line growth," adding, "Unlike in the first quarter, both the basic and color categories are showing growth trends, and despite the base burden from hygiene product performance contributions, the operating profit margin is expected to remain at last year's level."

In China, sales in Shanghai and Guangzhou are expected to increase significantly, recording a growth rate of 30%. The expansion of online clients and an increase in initial shipments for the 618 Shopping Festival are expected to outperform the growth rate of the Chinese cosmetics market.

In the U.S., sales are expected to decline by 13% in the second quarter due to a gap in supply contracts with major clients, and operating losses are also expected to continue.