[Click eStock] "Cosmax, Best Performance but Stock Price at Bottom... Target Price Up 11%"

[Asia Economy Reporter Park Ji-hwan] Shin Young Securities evaluated that while Cosmax is showing strong performance, its stock price has not escaped the undervaluation phase. The investment opinion 'Buy' is maintained, and the target price has been raised by 11.1% from the previous level to 200,000 KRW.

Shin Su-yeon, a researcher at Shin Young Securities, stated, "Despite concerns about a slowdown in cosmetics consumption, Cosmax's results from two years of strategic changes are expected to lead to strong quarterly performance," adding, "since 2019, strategies to strengthen profitability and secure online clients have been implemented mainly in Korea, China, and North America, and these results have become clearly visible since 2021."

In particular, the simultaneous achievement of top-line growth and profitability improvement is seen as encouraging. In North America, from the fourth quarter of last year, the company reduced cost burdens by changing contract types with major clients and completed cost processing for most related obsolete inventory. Researcher Shin analyzed, "Although it is difficult to expect a performance turnaround within this year, gradual deficit reduction can be anticipated."

Cosmax recorded its highest-ever quarterly operating profit in the second quarter. Researcher Shin said, "This was mainly due to improved profitability in Korea and strong performance of the Shanghai subsidiary," adding, "The Shanghai subsidiary accounted for 32.6% of total sales as of the second quarter, making it the second-largest subsidiary after the domestic separate corporation. It is growing alongside high growth of local online clients in China, and profitability has also improved significantly compared to the past."

This trend is expected to continue into the third quarter. Researcher Shin said, "In Korea, orders from clients focused on exports to Japan and China continue to increase, and the Shanghai subsidiary started the Singles' Day sales about one month earlier than usual, maintaining a strong performance trend due to client expansion."

Researcher Shin emphasized, "Although the third quarter is an off-season for cosmetics consumption, the demand for the fourth quarter Singles' Day is expected to be reflected earlier than usual, so strong performance following the second quarter can be anticipated."