[Click eStock] Amorepacific Returns to Two Years Ago, Target Price Lowered by 6%

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained its market performance rating on Amorepacific on the 23rd and lowered the target price by 6% to 150,000 KRW.

Amorepacific's consolidated sales for the second quarter are estimated at 1.0663 trillion KRW, and operating profit at 39.7 billion KRW, down 9% and 56% respectively compared to the same period last year. The previously estimated operating profit of 94.9 billion KRW and the market consensus of 83.1 billion KRW are expected to be significantly missed.

Sales from digital channels are expected to grow by 25% compared to the same period last year. However, due to channel restructuring, sales from the direct sales channel are expected to decline by double digits year-on-year, resulting in a 20% decrease in sales from traditional Korean channels excluding duty-free and digital channels compared to the same period last year.

On a KRW basis, duty-free and China sales are estimated to decrease by 43% and 23% respectively compared to the same period last year. Early in the second quarter, lockdowns in major Chinese cities disrupted operations at the Shanghai logistics center, and offline store closures were inevitable. The conservative market outlook for the second quarter also reflected a cautious response during the shopping festival on the 18th.

Amorepacific's sales growth rate in China has been sluggish compared to major groups, indicating a need to verify brand strength enhancement.

Yujeong Han, a researcher at Daishin Securities, said, "The Chinese government's strong quarantine policies due to the resurgence of COVID-19 are expected to ease after peaking in the second quarter," adding, "Offline traffic is expected to gradually recover, but during the past pandemic period, the Chinese cosmetics market remained resilient without stagnation, which poses a baseline burden compared to other countries showing recovery due to reopening."