[Click eStock] "Yeonwoo, Short-Term Earnings Decline Inevitable... Target Price Lowered"

[Asia Economy Reporter Hwang Yoon-joo] KB Securities stated that Yeonwoo is expected to face prolonged performance uncertainties as the domestic and international top clients' poor results continue longer than anticipated. Accordingly, the investment opinion remains 'Buy,' but the target price has been lowered by 17% to 25,000 KRW.

Researcher Park Shin-ae of KB Securities said, "We expect a recovery in the front-end market after 2023, but short-term poor performance seems inevitable."

Researcher Park forecasted that the difficult business environment will persist into the third quarter.

He analyzed, "Yeonwoo's third-quarter sales are expected to decline by 9% year-on-year to 62.3 billion KRW, with an operating loss of 300 million KRW, reflecting poor performance. This is due to the recent struggles of top domestic clients in the Chinese cosmetics market, causing ongoing negative impacts."

In the U.S. as well, major clients are focusing on depleting existing inventory rather than placing new orders, resulting in orders falling short of initial expectations.

Researcher Park evaluated, "The reason profitability is expected to be particularly poor in the third quarter is due to the regular bonuses paid every third quarter (estimated at about 2.8 billion KRW) and a one-time incentive payment of 4.3 billion KRW made in July related to the acquisition by Korea Kolmar."