[Click eStock] "Cosmax, the Biggest Beneficiary of China's Reopening"

[Asia Economy Reporter Jang Hyowon] Samsung Securities on the 11th raised the target price of Cosmax by 54%, from the previous 65,000 KRW to 100,000 KRW, calling it the biggest beneficiary of China's reopening.

Park Eunkyung, a researcher at Samsung Securities, said, "Cosmax's stock price showed a remarkable rise among Chinese consumer-related stocks at the end of last year, which is because Cosmax is the most certain beneficiary of China's reopening," and analyzed, "Expectations for the normalization of production and logistics at the Chinese subsidiary and the possibility of retaliatory orders from Chinese clients cannot be excluded. Additionally, if group tours by Chinese tourists, which had been suspended since 2017, resume, an increase in orders from small and medium-sized Korean brand companies is also expected."

Accordingly, researcher Park Eunkyung raised Cosmax's target price by 54%, from the previous 65,000 KRW to 100,000 KRW. Park said, "China will inevitably shift to a 'With Corona' system within 2023," and added, "The impact of China's reopening has already been partially reflected in this year's earnings forecast, and I believe that the valuation, which had excessively fallen below a price-earnings ratio (PER) of 10 times, needs to be normalized."

Therefore, he raised the target multiple from the previous 10 times to 15 times. This is explained as about 50% of the global cosmetics industry's average PER of 31 times.

He said, "Considering that as a manufacturer, Cosmax structurally has higher profitability volatility compared to brand companies, it is inevitable that it trades at a discount compared to the global cosmetics industry average," but added, "However, it is also true that it is trading at an additional discount due to continued large losses in the U.S. business. If there is a possibility of a turnaround in the U.S. subsidiary, further valuation rerating could be possible."