[Click eStock] "Cosmax, North America Losses Continue, Increasing Earnings Uncertainty... Target Price Down"

[Asia Economy Reporter Ji-hwan Park] Shinyoung Securities evaluated on the 11th that Cosmax's third-quarter earnings met market expectations, but uncertainties were highlighted due to the continued losses of its U.S. subsidiary. The investment opinion was maintained as 'Buy,' but the target price was lowered to 150,000 KRW.

Cosmax posted sales of 395 billion KRW and operating profit of 25 billion KRW in the third quarter of this year, marking increases of 23.2% and 79.7% year-on-year, respectively. Cosmax's third-quarter sales exceeded consensus, but operating profit was in line with consensus. This was due to the continued losses of the North American subsidiary despite strong performances in domestic and Chinese markets. Sales in China amounted to 147.3 billion KRW (up 37.7% year-on-year), North America 35.8 billion KRW (-27.6%), Indonesia 11.1 billion KRW (98.8%), and Thailand 4.5 billion KRW (8.4%).

Researcher Su-yeon Shin of Shinyoung Securities stated, "Although the domestic market recovery is slow, strong performance was recorded due to increased export volumes to China and Japan," adding, "All categories grew evenly, and the recovery in the color cosmetics segment was particularly encouraging."

Analysts predict that next year will be a year marked by heightened uncertainty. Especially in North America, sales related to hand sanitizers last year set a high base, resulting in weak performance. Researcher Shin cited delayed new product launches leading to a lack of price increase factors, rapid labor cost hikes, and production disruptions due to supply issues as reasons for the slow improvement in the North American business.

Shinyoung Securities maintained the 'Buy' rating, emphasizing that Cosmax is the only listed domestic company capable of co-growing with Chinese local brands. However, considering the earnings uncertainty next year, the target price was lowered. Researcher Su-yeon Shin explained, "Considering the potential domestic listing of the core business unit Cosmax East (China) and the expanded uncertainty over the performance turnaround of Cosmax West (North America), the target multiple was adjusted from the previous 23.8 times to 17 times, lowering the target price to 150,000 KRW."