[Click eStock] "iFamilySC Expected to Benefit from Japan's 'K-Beauty' Expansion"

Hana Securities Report

[Asia Economy Reporter Minji Lee] Hana Securities forecasted on the 6th that iFamilySC will become the biggest beneficiary of the spread of Japanese K-beauty.

In the second quarter, iFamilySC recorded sales and operating profit of 21.8 billion KRW and 2 billion KRW, respectively, marking increases of 22% and 218% compared to the same period last year. Despite a 76% decrease in sales to China compared to the same period last year, domestic cosmetics sales grew by 89% during the same period, driven by the H&B channel. Sales in other regions such as the US and Southeast Asia also increased by 67%. Excluding one-time stock compensation costs (1.4 billion KRW), operating profit was at a similar level to the second quarter of last year.

Domestic sales in the third quarter are expected to grow by 75% year-on-year due to strong growth in the H&B channel. Exports to Japan are also expected to contribute to sales growth with a 60% increase. The number of Olive Young store displays currently stands at 920, an increase of more than 80 compared to the same period last year. The number of Japanese drugstore entries, including Plaza and Tokyo Hands, has increased by more than 2,000 to about 8,000 during the same period.

Jongdae Park, a researcher at Hana Securities, said, “With expanded marketing, the display area per store will increase further in the fourth quarter,” and projected third-quarter results with sales of 22.9 billion KRW and operating profit of 2.4 billion KRW, representing growth of 61% and 129%, respectively. He added that this is expected to reflect a base effect from the sluggish China business in the third quarter of last year.

iFamilySC is expected to surpass domestic sales share (37%) by the end of this year through the expansion of sales in the Japanese market (41% share). Researcher Park explained, “Among Korean cosmetics companies, this company has the largest sales in Japan,” and added, “It is expected to benefit the most from the fourth wave of Hallyu, the indie brand market, and the expansion of K-beauty in Japan.”

Since 2020, the business scale has more than doubled due to consecutive hits domestically and internationally. Annual sales and operating profit for this year are estimated at 95 billion KRW and 12 billion KRW, respectively, representing increases of 33% and 112% compared to the previous year.

However, despite strong performance momentum, the stock price level is about 7.7 times based on the 12-month forward PER. Researcher Jongdae Park said, “Considering that it has been listed for less than a year and that sales are concentrated on tint and eye shadow under the single brand Rom&nd, it is undervalued,” and added, “We need to closely watch the performance momentum, new brand launches, category diversification efforts, and strategies.”