[Click eStock] "Yeonwoo Expected to Show Lower-High Pattern After 1Q Bottom"

Hana Securities analyzed on the 23rd that Yeonwoo's performance will follow a pattern of lower results in the first quarter followed by improvement, continuing its positive momentum.

Park Eun-jung, a researcher at Hana Securities, stated in a report on the same day, “Yeonwoo's first-quarter results showed consolidated sales of 50.5 billion KRW and an operating loss of 2.5 billion KRW, representing a 25% decrease and a return to losses compared to the same period last year, respectively,” adding, “Sales have been on a downward trend since the third quarter of 2021, and the current quarterly sales volume has fallen to the level of 2015, the year the company was listed.”

Researcher Park further explained, “The main causes of the poor performance were a decrease in sales to China by major domestic companies and inventory adjustments by North American clients, which led to a decline in orders from the three core companies and contributed to a sharp drop in profitability.”

Park analyzed, “The profit margin fell by 9.3 percentage points compared to the same period last year, mainly due to a decrease in operating rates,” and added, “The cost ratio worsened by 6.6 percentage points to 94.9% compared to the previous year, and although the absolute amount of selling and administrative expenses was managed similarly, the ratio of these expenses increased by 2.7 percentage points year-on-year due to the decline in sales.”

He also noted, “During the reopening process, demand recovery has been centered on color cosmetics, and the pace of Yeonwoo's sales recovery appears slower than the industry,” but added, “The positive aspect is that North American exports and orders from Company L in the second quarter improved by 30% and 43%, respectively, compared to the previous quarter, showing signs of recovery.”

He continued, “Yeonwoo's second-quarter performance is expected to surpass the break-even point, and the company is projected to follow a pattern of lower results in the first quarter followed by improvement, continuing its positive momentum.”