[Asia Economy Reporter Hyungsoo Park] Coloray has been on the rise for two consecutive days. This appears to be influenced by signals of changes in China’s ‘Zero COVID Policy,’ which was a key cause of decreased consumption.
As of 9:55 AM on the 8th, Coloray is trading at 1,240 KRW, up 3.77% from the previous day.
The stock price rose to the daily limit the day before and has continued its upward trend for two days. Its market capitalization has recovered to around 80 billion KRW.
Chinese authorities are hastily easing quarantine measures. This seems to be influenced by the spread of blank protests that began as collective resistance to the high-intensity quarantine regulations. The economic contraction caused by the prolonged Zero COVID policy is also cited as a background for the shift in stance toward easing quarantine policies. In fact, China’s retail sales turned negative month-on-month in October, continuing the domestic demand slump.
Coloray signed a joint venture contract with Hangzhou Yayang Technology Co., Ltd., a Chinese color cosmetics manufacturer, the day before. Coloray is a key supplier to Yayang Technology, providing a rich product lineup, professional technical support, and multi-dimensional, in-depth, high-efficiency services. Coloray’s advanced research and development capabilities have been a strong driving force behind Yayang Technology’s performance growth.
According to the company, Yayang Technology’s sales increased significantly during the COVID-19 pandemic, growing into a leader in the East China region. Chairman Zhang Zhongxin of Yayang Technology introduced a series of new products such as Chameleon, Inorganic Metal Magenta, Wugum, and Platinum to the market, receiving multiple purchase intentions. Especially, products like 6M60A, 6F60T, and 6J60A received many overseas orders.
A Coloray representative said, "We have decided to strengthen cooperation regarding trends in the color cosmetics industry, new product research and development directions, and market development strategies."
Coloray recorded sales of 26.4 billion KRW and operating profit of 7.3 billion KRW in the third quarter. It has been steadily generating profits despite the COVID-19 situation. As of the end of the third quarter, it holds more than 160 billion KRW in cash and cash equivalents.
Coloray secures a large amount of cash for its distribution business. In a structure where products such as luxury goods are purchased and then distributed on platforms, large-scale liquidity is essential. It expects online sales to activate once the COVID-19 situation eases. It is preparing for the post-COVID situation by attracting new platforms such as Tmall, JD.com, and Pinduoduo.
The pearl luster pigment business, Coloray’s core business area, has a high profit margin, approaching 50% operating profit margin. It has vertically integrated by securing subsidiaries that produce raw materials independently and can utilize China’s low labor costs, resulting in relatively low cost burdens. Additionally, rapid new product launches are considered a key competitive advantage that raises profit margins.
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