[Click eStock] "AmorePacific, Safe Investment Amid China-Origin Tailwind... Target Price Up"

[Asia Economy Reporter Kwon Jae-hee] Korea Investment & Securities maintained a 'Buy' rating on Amorepacific on the 6th and raised the target price by 16% from the previous 155,000 KRW to 180,000 KRW.

Amorepacific's Q4 sales last year recorded 1.1142 trillion KRW, and operating profit was 35.4 billion KRW. While sales met market expectations, operating profit is expected to fall short by 25%. The reason operating profit underperformed market expectations is due to the resurgence of COVID-19 in China in December last year, which caused cosmetic demand recovery to be weaker than expected. Additionally, competition in the Korean duty-free market in Q4 last year did not ease compared to Q3. Sales in China are expected to decrease by 30% year-on-year, and e-commerce is expected to decline by 4%, similar to Q3. The overseas subsidiaries, which recorded a profit of 51.8 billion KRW in 2021, are expected to post a slight operating loss for the full year this year.

Currently, China is experiencing growing pains toward normalization, such as the resurgence of COVID-19 after the practical abolition of the zero-COVID policy. However, until the abolition of the zero-COVID policy translates into actual sales contributions, the favorable stock performance of duty-free and cosmetic companies with a high sales proportion to China is expected to continue due to improved sentiment.

Myungjoo Kim, a researcher at Korea Investment & Securities, analyzed, "Amorepacific is an investment destination that can safely enjoy the tailwind toward China in 2023 due to the effects of China's restructuring. With the One China strategy and the rebranding effect of Sulwhasoo, Amorepacific's duty-free and China channels are expected to achieve stable sales growth in 2023."