[Click eStock] "AmorePacific, Recovery in China Business... Target Price Up"

On the 3rd, Korea Investment & Securities maintained a 'Buy' rating on Amorepacific, citing a recovery in its China business, and raised the target price to 200,000 KRW.

Myungjoo Kim, a researcher at Korea Investment & Securities, stated, "We believe that the demand for cosmetics among Chinese consumers is recovering more than the market's concerns, and accordingly, we expect the operating loss of the Chinese subsidiary to decrease compared to the fourth quarter of last year."

It is forecasted that the sales in the first quarter of this year will increase by 3.9% year-on-year to 948.9 billion KRW, while operating profit is expected to decrease by 22.1% year-on-year to 50.2 billion KRW. Kim assessed that with the recovery of Korea's duty-free sales in the first quarter, Amorepacific's duty-free sales also increased by 46.1% compared to the same period last year. Additionally, considering favorable exports of cosmetics to the U.S., Amorepacific's U.S. sales are expected to grow by 32% year-on-year.

In the fourth quarter of last year, Amorepacific's Chinese subsidiary recorded a larger operating loss than market concerns (approximately -50 billion KRW), which led to a significant drop in the stock price. Although the operating loss of the Chinese subsidiary is expected to continue in the first half of this year, Kim explained that this has already been reflected in the stock price.

Kim evaluated, "The demand for cosmetics purchases by Chinese consumers is gradually recovering more than the market's concerns, and this year, Amorepacific's China business is unlikely to fall short of the market's expectations, which have already been lowered significantly."

He further analyzed, "Recently, not only Korea's duty-free industry but also sales in the Hainan duty-free zone are recovering, indicating that the demand for cosmetics among Chinese consumers is gradually improving."