[Click eStock] "Cosmax, Strong 4Q Earnings but Weak Stock Rebound Momentum"

US Subsidiary's Poor Performance... Negative Factors Persist Including Domestic Listing of China Subsidiary

[Asia Economy Reporter Minwoo Lee] Cosmax is expected to post strong earnings in the fourth quarter of last year. However, considering the earnings uncertainty of its U.S. subsidiary and the domestic listing of its China subsidiary, it is assessed that the stock price rebound momentum will remain weak for the time being.

On the 14th, NH Investment & Securities lowered Cosmax's investment rating to 'Hold' and cut the target price by 35.9% to 93,000 KRW, citing these reasons. The closing price on the previous day was 83,700 KRW.

The fourth quarter earnings of last year are estimated at consolidated sales of 438.8 billion KRW and operating profit of 23.4 billion KRW, representing increases of 23.8% and 122.9% respectively compared to the same period last year. If there are no one-time expenses, operating profit is expected to grow significantly due to the base effect from the previous year's operating loss of the U.S. subsidiary.

The Korean subsidiary is projected to record sales of 214.3 billion KRW, up 17.6% year-on-year, supported by the success of new products and continued growth in export sales. The Shanghai subsidiary in China is expected to post sales of 128.7 billion KRW, a 32.4% increase compared to the same period last year. High growth is anticipated to continue as online customer orders increase. However, the Guangzhou subsidiary is expected to see sales decline by 7.6% year-on-year to 39.2 billion KRW due to poor performance of its largest customer. In the U.S., NuWorld's sales are estimated at 13.7 billion KRW and Ohio's sales at 17.3 billion KRW, both expected to decline by 48.7% and 27.4% respectively compared to the same period last year.

The future stock price outlook is considered somewhat bleak. Although the stock price has already plunged, a meaningful rebound is deemed unlikely. Mi-jin Jo, a researcher at NH Investment & Securities, explained, "The perspective that Cosmax holds market-leading technology and competitiveness through developing hit products domestically and in China and collaborating with trend-leading companies remains valid. However, considering the slowdown in sales growth of Cosmax East, its domestic listing, and ongoing uncertainties in the U.S. subsidiary, the stock price momentum is likely to remain weak for the time being regardless of the company's fundamentals."