[Click eStock] "Cosmax, Target Price 190,000 KRW... Buy Rating"

Meritz Securities on the 14th issued a buy rating and a target price of 190,000 KRW for Cosmax.

Cosmax exceeded expectations with Q1 sales of 526.8 billion KRW, operating profit of 45.5 billion KRW, and net profit of 19.2 billion KRW. The operating leverage effect due to top-line growth was evident.

Domestic sales reached 315.4 billion KRW with an operating profit of 30.1 billion KRW. Strong overseas sales of K-Beauty products drove domestic demand, while exports benefited from large orders from global companies. The combination of price increases and volume growth improved profitability, more than offsetting the burden of bad debt write-offs.

China recorded sales of 154.4 billion KRW and net profit of 11.8 billion KRW. The US posted sales of 38.8 billion KRW but a net loss of 13.8 billion KRW. This was due to the strong dollar, base effects, and advance deliveries. Interest payments to the headquarters and non-operating expenses continued to result in net losses.

Sales in Southeast Asia surged due to strong demand for color cosmetics, but profits were weak due to foreign exchange losses.

Hanuri, a researcher at Meritz Securities, stated, "The combined bad debt write-offs, interest expenses, and other costs account for 34% of consolidated operating profit," explaining "why the net profit margin is only 5% despite sales exceeding 2 trillion KRW." Hanuri added, "However, the core competitiveness of ODM is increasing," and recommended a buy approach, noting that "order growth, product expansion, and improvements in overseas subsidiaries are all effective."