[Click eStock] "Amorepacific, Short-Term Stock Decline Due to Poor Performance... Target Price Down"

Target Price Revised Downward by 16.7% Compared to Previous

On the 7th, Korea Investment & Securities downgraded the target price of Amorepacific from 240,000 KRW to 200,000 KRW, viewing the poor performance as likely to lead to a short-term stock price decline. The investment rating was maintained at 'Buy.'

Myungjoo Kim, a researcher at Korea Investment & Securities, stated, "While maintaining the investment rating for Amorepacific, we are lowering the target price by 16.7% compared to the previous level. It is regrettable that the disappointing performance came amid heightened concerns about the U.S. economy. Given the high expectations for COSRX, Amorepacific's weak second-quarter results are expected to lead to a short-term stock price decline."

Amorepacific's consolidated sales for the second quarter of this year were 904.8 billion KRW, down 4.3% year-on-year, and operating profit fell 29.5% to 4.2 billion KRW. Researcher Kim analyzed, "Operating profit missed market expectations by 94%, due to sluggish performance in the China-related business and COSRX's results falling short of expectations. Amorepacific changed its sales method from the second quarter to fundamentally improve the structure of its China business, which caused a significant sales decline in the second quarter." He added, "The operating loss of the China subsidiary in the second quarter is estimated to be similar to that of the second quarter last year. Unfortunately, the deficit is likely to increase slightly in the third quarter."

The most disappointing aspect of Amorepacific's second-quarter results was the underperformance of COSRX. Researcher Kim said, "COSRX's sales in the second quarter are estimated to have slightly decreased to around 143 billion KRW compared to the previous quarter. Operating profit also appears to have declined from the previous quarter. Because there was explosive sales growth in the first quarter, expectations for COSRX's performance were very high. It is very regrettable that the second quarter did not meet these expectations, contributing to the overall weak company performance." Given the explosive sales increase in the first quarter, it is estimated that some countries experienced a consumer spending gap in the second quarter. COSRX is actively expanding sales outside the U.S. recently, and related costs are also likely to have increased.

It is expected that the stock price will recover once macroeconomic uncertainties are resolved. Researcher Kim forecasted, "Considering that Amorepacific's brands are showing favorable results not only in the U.S. but also in other countries, the stock price will recover as valuation attractiveness emerges when macro uncertainties are resolved."