[Click eStock] "Cosmax, Profit Upgraded Due to US Subsidiary Restructuring... Target Price ↑"

[Asia Economy Reporter Hwang Yoon-joo] Samsung Securities announced on the 17th that it is revising upward its 2023 earnings forecast for Cosmax by reflecting the effects of restructuring its US subsidiary. Accordingly, the investment opinion remains 'Buy,' but the target price has been raised to 100,000 KRW.

Park Eun-kyung, a researcher at Samsung Securities, stated, "Despite downward adjustments to the Chinese subsidiary's performance reflecting concerns over prolonged domestic demand weakness in China, the earnings forecasts for 2022-2023 are being revised upward considering the restructuring effects of the US subsidiary."

Researcher Park summarized Cosmax's investment points into three: △strengthening leadership within the Chinese cosmetics industry △pricing policy △ restructuring of the US subsidiary.

He explained, "Sales in the Chinese business surged significantly after 2020," adding, "This reflects a concentration of orders to top-tier companies during crisis situations."

He further evaluated, "Despite the lockdown risks in major Chinese cities in the second quarter, the company demonstrated its ability to minimize production disruptions," and "Another leap in market share is expected."

The second point is the effort to normalize prices. Researcher Park said, "Given the low likelihood of a short-term decrease in raw material and labor costs, the company recently attempted price normalization reflecting cost increases," and "This is expected to offset inflation."

Park forecasted, "Considering the company's non-price competitiveness such as quality and on-time delivery, resistance from clients is expected to be minimal."

Lastly, he pointed out "the decision to carry out restructuring by selling one of the two US factories in July."

Researcher Park predicted, "Since entering the US market in 2013, the company recorded a cumulative net loss of 280 billion KRW until 2021," and "Once the integration work is completed in the first quarter of 2023, operating rates will increase and management costs will be streamlined, leading to a significant improvement in profits."