[Click eStock] "Aekyung Industrial, Household Goods Performance Disappointing This Year... Target Price Down"

Hana Securities on the 29th downgraded the target price for Aekyung Industrial to 29,000 KRW, stating that "this year's performance in the household goods sector is expected to decline." The buy rating was maintained. The previous trading day's closing price was 17,260 KRW.

Researchers Eunjeong Park and Dahye Kim of Hana Securities said, "Aekyung Industrial's Q4 results last year showed consolidated sales of 170 billion KRW, a 5% increase compared to the same period last year, and operating profit of 11.6 billion KRW, a 2% decrease. This is 14% below market expectations," but they evaluated that "considering the temporary increase in labor costs in Q4 due to last year's strong performance, it aligns with market expectations."

They added, "Marketing expenses including brand investments also increased compared to the average quarter. Although industrial demand in China was sluggish, by focusing on digital and global markets, the performance during the Guanggun Festival grew by more than 10%," they noted.

Cosmetics recorded sales of 71.3 billion KRW and operating profit of 9.7 billion KRW, increasing by 10% and 11% respectively compared to the same period last year. Researcher Park emphasized, "Exports account for 70% of cosmetics sales, with China making up more than 80%. The Chinese industry is weak, but the category is recognized as a core product and grew in the low double digits, while attempts were made to diversify regions," adding, "Expansion in the US, Japan, and Vietnam led to non-China growth exceeding 40%."

However, household goods recorded sales of 100 billion KRW and operating profit of 1.7 billion KRW. Operating profit decreased by 44% compared to the same period last year. Researcher Park said, "Although high-margin items were improved, operating profit margin was 2% due to increased marketing investments. This is a 1.3 percentage point decline compared to the same period last year," she said.

Regarding this year's outlook, they stated, "Aekyung Industrial's consolidated sales are expected to be 720 billion KRW and operating profit 63.9 billion KRW this year," adding, "For cosmetics, focusing on the US, Japan, and Vietnam and expanding outside China is expected to result in 13% sales growth and 18% operating profit growth."

They further explained, "For household goods, a 5% sales growth and 18% operating profit decline are assumed. While efforts will focus on expanding overseas, the domestic channel, centered on personal care, is expected to face intensified competition, so margins were conservatively estimated," adding, "Due to the downward revision of household goods estimates, the target price was also lowered."