LG Saenggeon and AmorePacific Among Others Showed High Expectations but Weakened Due to Poor Earnings
[Asia Economy Reporter Park Jihwan] Since the beginning of this month, with the phased recovery of daily life, so-called ‘With Corona,’ expectations were high for cosmetics stocks, but they have yet to escape the slump.
According to the Korea Exchange on the 19th, LG Household & Health Care’s stock price fell 13.8% over the past month from the 19th of last month to the day before. During the same period, major cosmetics stocks such as Amorepacific (-7.63%), Kolmar Korea (-11.74%), and Cosmax (-23.31%) also showed a uniform decline.
The biggest factor behind the stock price drop is poor earnings. LG Household & Health Care’s cosmetics division, which accounts for more than half of total sales in Q3 this year, recorded sales of 1.0267 trillion KRW, down about 10% compared to the same period last year, leading to an overall sales slump. Amorepacific also posted an operating profit of 50.3 billion KRW in Q3, down 10.2% from the same period last year. This was 35% lower than securities firms’ expectations. While the domestic market performed well, overseas earnings were weak. Due to the sluggish Chinese market, which is the largest overseas business segment, overseas operating profit plunged 57% to 8.5 billion KRW. In the case of Cosmax, despite recording solid sales and operating results, net profit turned to a loss of 1.8 billion KRW due to expanded losses in its U.S. subsidiary.
Securities firms have also competitively lowered their target prices. The common reason was the poor earnings and the difficulty of resolving the earnings slump in the short term. According to financial information provider FnGuide, 241 securities reports lowered their target prices from the beginning of this month to the day before. Among them, Cosmax had the most reports with 11 lowering target prices. Kolmar Korea also had 8 reports lowering target prices.
For Amorepacific and LG Household & Health Care, the number of target price downgrade reports this month was limited to 4 and 2 respectively, due to a surge in downgrade reports last month. LG Household & Health Care ranked among the stocks with the most target price downgrade reports last month, with 18 out of 360 reports. Amorepacific also had 9 reports lowering target prices. The securities industry expects the two major cosmetics giants’ stock prices to remain sluggish for the time being. Heo Jena, a researcher at KakaoPay Securities, said about LG Household & Health Care, “An unfavorable business environment continues due to slowing consumption in the Chinese market and intensified competition.” Kim Hyemi, a researcher at Cape Investment & Securities, said, “Amorepacific’s stock price is expected to show a sluggish trend until Q1 next year, when there is a profit base effect.”
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