[Click eStock] Amorepacific, Chinese Subsidiary Expected to Show Poor Performance... Target Price Lowered to 220,000 KRW

On the 26th, Kiwoom Securities downgraded the earnings estimates for Amorepacific's Chinese subsidiary and lowered the target stock price to 220,000 KRW. The investment rating was maintained as 'Buy.'

In a report on the same day, Sojeong Jo, a researcher at Kiwoom Securities, stated, "We have a positive view on the company's growth momentum outside China, but we have lowered the earnings estimates for the Chinese subsidiary," adding, "This is because the turnaround timing for the Chinese subsidiary is likely to be delayed due to efficiency improvements in some online channels."

However, the growth momentum in non-China channels was positively evaluated. Researcher Jo said, "Although the weakness in China is disappointing, the company's growth momentum is already directed towards non-China channels," and analyzed, "Growth is expected not only in COSRX but also in the US and European channels of in-house brands such as Laneige and Innisfree."

He noted that despite the downward revision of earnings estimates leading to a change in the target stock price, the growth momentum outside China remains promising, and thus maintained the investment rating as Buy.

Amorepacific's second-quarter sales are expected to be 948.1 billion KRW, with an operating profit of 54.7 billion KRW, falling short of market expectations. Although the consolidated earnings of COSRX are scheduled to be included, the losses from the existing Chinese business are expected to be larger than anticipated.

Specifically, duty-free sales to China are estimated at 79.7 billion KRW, and sales from the Chinese subsidiary are projected to be 103.8 billion KRW. Researcher Jo stated, "The Chinese subsidiary's sales are expected to decline due to the impact of online channel efficiency improvements, and an operating loss is anticipated."

He viewed the Western channels as expected to show solid growth. He forecasted North American sales of 81.6 billion KRW and Europe, Middle East, and Africa (EMEA) sales of 14.5 billion KRW.