[Click eStock] "Pumtek Korea Optimized for Changes in Cosmetics Market... Performance Improvement Expected"

Hana Securities Report

[Asia Economy Reporter Minji Lee] Hana Securities analyzed on the 25th that Permtek Korea possesses a portfolio optimized for changes in the customer cosmetics market.

In the second quarter, the company's consolidated sales and operating profit recorded 61.9 billion KRW and 7.5 billion KRW, respectively, increasing by 10% and 3% compared to the same period last year. Operating profit exceeded 6.8 billion KRW, marking a solid performance. Jongdae Park, a researcher at Hana Securities, said, "Both the pump and tube businesses appropriately passed on price increases, alleviating the burden of rising costs."

Pump sales led the performance improvement with a 10% increase compared to the same period last year, despite sales declines from the two major clients, AP and LG Household & Health Care, because sales to other domestic clients increased by 52% year-on-year. By category, sales in the compact and stick segments rose sharply by approximately 29% and 157%, respectively, during the same period. The stick segment, a representative high-margin category, increased its sales proportion by 8% (up 5 percentage points year-on-year), contributing to improved profitability in the pump business.

The third quarter is a seasonal off-season with smaller sales and profit scale. Sales are expected to grow by 8% despite the high base last year. Despite sales declines from the big two clients, contributions from other domestic clients and overseas sales to Japan are increasing. In particular, due to the effect of new contracts with HCT, sales to North America and Europe are expected to show strong growth. Since raw material and labor cost burdens have increased since the second half of last year, there will be a significant base effect in the second half of this year. Operating profit in the fourth quarter is estimated to recover to 6.9 billion KRW, a 26% increase compared to the same period.

Besides the big two, Permtek Korea has a high sales proportion from other indie brands, and sales proportions in non-China regions such as Japan, North America, and Europe are steadily rising. Researcher Jongdae Park said, "The business structure is most suitable for the trend where the leadership of the domestic cosmetics market is shifting from China, luxury, and large corporations to non-China, mid-to-low price, and indie brands," adding, "Considering the high entry barriers and improving performance, the current price-earnings ratio (PER) of 11 times is significantly undervalued."