[Click eStock] "AmorePacific, China Deficit Offset by Overseas Profit Increase... Target Price Down"

NH Investment & Securities diagnosed on the 6th that Amorepacific's large-scale deficit in China is offsetting its core business and KOSRX's overseas profit growth. The investment opinion 'Buy' was maintained, but the target price was lowered from the previous 200,000 KRW to 180,000 KRW.

NH Investment & Securities forecasted that Amorepacific's consolidated sales for the third quarter would increase by 9.0% year-on-year to 970.8 billion KRW, and operating profit for the same period would increase by 120% to 38 billion KRW. The operating profit is 28% below market expectations. Ji-yoon Jeong, a researcher at NH Investment & Securities, said, "We expect an operating loss of 51 billion KRW due to changes in the China general distribution business structure, inventory returns, and workforce restructuring," adding, "The large-scale deficit in China is offsetting the core business and KOSRX's overseas profit growth."

However, it is evaluated as a buying opportunity in the mid- to long-term perspective if further adjustments occur. Researcher Jeong said, "Even if we conservatively assume that the deficit in China next year remains at around 115 billion KRW with no improvement, the lower bound of corporate value is judged to have bottomed out at 7.6 trillion KRW in valuation," and added, "After the third quarter, as the China business stabilizes, the scale of overseas profits will be sufficiently reflected, and corporate value can be re-emphasized."