[Featured Stock] J2K Bio Sees Surge in Cosmetic Ingredient Orders... The Only Domestic Listed Vendor for CosRx

J2K Bio is showing strong performance. It appears that the surge in orders from its main clients, led by CosRX, as well as from overall original design manufacturing (ODM) clients such as Cosmax Korea and Kolmar Korea, is influencing the stock price. Securities firms have analyzed that it is reasonable to assign a premium given that J2K Bio is the only publicly listed vendor domestically for CosRx, which is leading the K-beauty market. Since 2022, J2K Bio has started co-developing bio-based cosmetic ingredients with major brand companies like Amorepacific and LG Household & Health Care. The new product development is expected to be completed in the first half of this year, with supply possibly starting as early as the second half.

As of 9:42 AM on the 17th, J2K Bio is trading at 32,000 KRW, up 5.79% from the previous trading day.

Heo Seon-jae, a researcher at SK Securities, stated, "Although the expansion plan is scheduled for the second half of next year, considering the current quarterly performance growth trend, early expansion could begin as soon as the second half of this year."

He added, "In fact, production capacity for snail cream and essence ingredients supplied to CosRx is expected to more than double in the second half of this year based on customer requests." He emphasized, "Among various product lines, the snail mucin ingredient for CosRX is one of the most profitable, so an increase in sales proportion of this product is expected to improve profit margins."

Researcher Heo also noted, "Notably, J2K Bio has already secured the site and design blueprints for the expansion," and analyzed, "The expected expansion period is estimated to take about 4 to 5 months." Additionally, he mentioned, "The anticipated investment amount is around 5 to 6 billion KRW," and "This can be covered within the 15 billion KRW cash holdings as of Q1 this year, so no additional fundraising is expected."

Heo forecasted, "From next year, the combination of expansion, new products, and new clients will contribute to high growth in performance, further enhancing valuation attractiveness." He continued, "The overhang issue, which was a major cause of the significant stock price decline since the beginning of the year, has mostly been resolved," and analyzed, "Supply and demand pressures have also been greatly eased."

Heo emphasized, "J2K Bio has secured new clients among domestic small and medium-sized ODM companies, including indie brand companies such as PF Nature and Nodinary," and added, "Sales growth toward domestic and international indie brands will accelerate further." Nodinary is a company where APR is the second largest shareholder and mainly manufactures APR’s cosmetic brands such as Medicube, Aprilskin, and Glamdee.

SK Securities has revised upward its 2023 revenue and operating profit forecasts for J2K Bio by 34.2% and 12.5%, respectively, compared to previous estimates. They project revenue of 48.1 billion KRW and operating profit of 10.1 billion KRW, representing increases of 68.8% and 80.9% over last year, respectively.