[Click eStock] "Amorepacific, Focus on Non-China Sales Growth... Increase Share When Adjusted"

[Asia Economy Reporter Kwon Jae-hee] Hana Securities maintained its 'Buy' rating and target price of 160,000 KRW for Amorepacific on the 28th.

In the third quarter, Amorepacific is expected to record a sluggish performance in the Chinese market, with an operating loss of around 20 billion KRW. Internally, Amorepacific is undergoing brand and channel restructuring, reducing offline stores of Innisfree, Laneige, and Mamonde by 10-50% compared to the previous year. Sulwhasoo is also strengthening the transition from the Jaum 2-type to the Jaumsaeng line. Although sales in the Chinese business are expected to increase compared to the previous quarter, they are anticipated to decrease by about 30% year-on-year. For the time being, the focus will be on improving brand and channel mix rather than sales growth. Due to the increased fixed cost burden from declining sales, the third quarter is expected to continue with an operating loss of around 20 billion KRW. Duty-free store sales, which represent actual Chinese demand, are also expected to decrease by about 40% year-on-year.

However, sales in the U.S. and Southeast Asia are expected to continue strong growth of 20-40% year-on-year. In the U.S. business, Laneige is driving growth. It is increasing brand awareness mainly among the MZ generation through Sephora and expanding sales through Amazon entry. The acquisition of the U.S. luxury beauty brand Tata Harper and Sulwhasoo's entry into Amazon are expected to act as additional performance momentum. In Southeast Asia, with rising online penetration, Sulwhasoo (Thailand) and Laneige are expanding, and in Japan, due to increased demand for K-beauty, Laneige entered in the third quarter following Innisfree and Etude. Channels are expanding from one-brand shops to drugstores, variety shops, and online. Based on this, there is a high possibility that performance will recover from the fourth quarter onward.

Jong-dae Park, a researcher at Hana Securities, analyzed, "Sales of Sulwhasoo in China are expected to turn positive year-on-year due to the base effect of the Singles' Day, and if the Chinese consumer economy recovers, total sales in China could also increase. If the Chinese business performance, including duty-free stores, turns around, the extent of performance improvement will likely depend on the results in non-China regions such as the U.S., Japan, and Southeast Asia."

Researcher Park also advised, "It is the time to increase your position whenever the stock price adjusts."