[Click eStock] "EcoMarketing Expects Andar Sales Growth Next Year"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 32,000 KRW for Eco Marketing on the 8th. Although this year's earnings outlook is expected to be downgraded, considering Andar's sales growth, it is judged that significant earnings improvement could appear from next year.

Eco Marketing's expected sales and operating profit for the second quarter are 63.5 billion KRW and 12.7 billion KRW, respectively. Sales are expected to increase by 23% year-on-year, but operating profit is forecasted to decrease by 38%, falling short of the market expectation of 16.7 billion KRW. The consolidated reflection of the 56% stake in Andar began last month, and operating profit by segment was 7.4 billion KRW, down 29% year-on-year. The subsidiary's operating profit decreased by 47% compared to a year ago to 5.3 billion KRW, with Andar estimated to be at the breakeven point.

The biggest reason for the poor performance is the increase in advertising expenses of the subsidiary. Most of these are invested in the growth of the Andar brand. Lee Ki-hoon, a researcher at Hana Financial Investment, said, “We succeeded in branding products such as Cluck, Sensemom, Ohora, and Mongje in the early stages, achieving high profit leverage,” adding, “There is a need to maintain high expectations for Andar as well.”

Last year, Andar recorded sales of 76 billion KRW and an operating loss of 8.9 billion KRW. Sales increased by 5% year-on-year, but operating losses continued. Since the appointment of co-CEO Park Hyo-young in January, Andar is estimated to have turned profitable from June through its strengths in target marketing, online channels focused on its own mall, and cost efficiency. In particular, the cost ratio, which rose to 49% last year due to inventory inefficiency, has rapidly stabilized to the 30% range. Researcher Lee Ki-hoon explained, “By redefining the target market, higher growth potential will be secured,” and added, “There is also a sufficient possibility of growing faster than the expected sales of 200 billion KRW in 2023.”