[Click eStock] "Amorepacific Q3 Earnings Expected to Fall Short of Estimates...Target Price ↓"

[Asia Economy Reporter Ji-hwan Park] Hyundai Motor Securities maintained its investment opinion of 'Marketperform' on Amorepacific on the 27th, stating that it is expected to record earnings below market expectations for the third quarter of this year, and lowered the target price to 210,000 KRW.

Researcher Hyejin Jeong of Hyundai Motor Securities said, "Third-quarter earnings are expected to show consolidated sales of 1.0767 trillion KRW, a 1.1% decrease year-on-year, but consolidated operating profit is expected to increase by 27.2% to 71.3 billion KRW." However, all figures fall short of market expectations. In particular, ongoing investments for brand line restructuring and channel shifting in the overseas segment due to intensified competition in the Chinese cosmetics market have led to a decrease in sales scale of major brands, resulting in a negative leverage effect and reduced segment profitability, according to analysis.

In the domestic market, although the impact of social distancing measures that strengthened traditional offline channels continues partially, online channels are maintaining solid growth with a 30% increase compared to the previous year. On the other hand, overseas, in China, the major luxury brand Sulwhasoo is estimated to have grown by 40% over the past year, but Innisfree, which is undergoing offline store consolidation, saw a 40% reduction in store numbers, and online channel sales are also expected to decline by about 10%.

Researcher Hyejin Jeong evaluated, "Although valuation multiples have significantly decreased due to recent sector and company stock price adjustments, the burden of medium- to long-term brand investment costs remains due to intensified forward market competition," adding, "The strong expectations for clear earnings improvement, which were the basis for relatively high valuation multiples, have disappeared, weakening the short-term stock price momentum."