[Click eStock] "Cosmax Benefits from China's Reopening... Target Price Up"

[Asia Economy Reporter Son Sunhee] Hana Securities on the 17th upgraded its investment opinion on Cosmax to 'Buy' and significantly raised the target price from the previous 73,000 KRW to 100,000 KRW. This is due to the expected benefits from China's economic reopening.

Cosmax's consolidated sales for the fourth quarter of last year are estimated to have decreased by 13% year-on-year to 367.3 billion KRW, and operating profit is expected to have fallen sharply by 86% to 4.2 billion KRW. The operating profit is far below market expectations (20.4 billion KRW).

The poor performance was due to sluggish sales in China, which accounts for a significant portion of Cosmax's profits, affected by the impact of COVID-19, as well as weak results from the domestic corporation. The Indonesian and Thai subsidiaries showed solid performance.

Hana Securities has been monitoring the period from December last year to the present as the 'China reopening transition period.' Researcher Park Eun-jung of Hana Securities said, "From December (last year) to now, due to cluster infections, Cosmax's China operations have experienced demand decline, productivity drops, and logistics chaos," but added, "This is expected to normalize as the number of confirmed cases stabilizes."

This year, operating profit is expected to nearly double, indicating a recovery in performance. Researcher Park said, "From the second quarter, there is a high possibility that orders from China and domestic markets will expand significantly due to increased demand for Chinese brands and inbound inflows domestically," adding, "Especially in 2023, leverage maximization is expected through new product expansion, increased order volumes, and reduction of short-lead-time orders." She also noted, "Although there were concerns about the listing issue of the Chinese subsidiary in Korea, the recovery of China's performance takes priority, so it is unlikely to be highlighted in 2023."