[Click eStock] "Silicon2 Aggressively Targets Europe... Shipping Costs Not Significant"

Hana Securities analyzed on the 23rd that Silicontwo is actively targeting the European market, and the proportion of the US market is not as large as concerns suggested. Accordingly, they maintained a 'Buy' investment rating and a target price of 70,000 KRW.

Park Eun-jung, a researcher at Hana Securities, stated, "Silicontwo's sales in the European market in the second quarter reached the level of the US market (50 billion KRW), and sales in the UAE are also growing rapidly."

Currently, Silicontwo's sales proportion ranks as US > Europe > Southeast Asia > UAE. The company expects rising demand for K-Beauty in the European market and Park believes it will soon reach the scale of the US market. Silicontwo tends to invest quickly where demand signals appear, and it is considering Europe as the next market after the US.

Park explained, "They are currently engaged in activities such as establishing a branch office (Netherlands), a logistics warehouse (Poland), and attracting CA (including major retailers). Especially in Europe, there are various hurdles for overseas expansion such as customs clearance and regulations by country, so the dependence of newly entering brands on Silicontwo is expected to be quite high."

The burden of transportation costs in the second quarter also did not significantly affect performance, contrary to market expectations. Although the shipping freight index surged, Silicontwo has a higher proportion of air freight.

Park pointed out, "The main items of Silicontwo's selling and administrative expenses were commission fees > salaries > transportation costs. In 2023, the company's transportation costs amounted to 10.9 billion KRW, which was only 3% of sales."

She added, "In the second quarter as well, efficiency in selling and administrative expenses appeared due to increased sales, and despite the sharp rise in freight rates, the proportion of transportation costs remained at 2%. Silicontwo's business orientation is focused on expanding the global market share of K-Beauty and improving the efficiency of selling and administrative expenses."