[Click eStock] "Cosmax Lowers Earnings Estimates for Chinese Subsidiary... Target Price Down"

NH Investment & Securities forecasted on the 23rd that Cosmax's third-quarter earnings will fall short of consensus due to a downward revision of the performance estimates for its Chinese subsidiary. Accordingly, they maintained a 'Buy' investment rating but lowered the target price to 180,000 KRW.

Jiyoon Jeong, a researcher at NH Investment & Securities, stated, "The consolidated sales for the third quarter are expected to increase by 16% year-on-year to 531.2 billion KRW, and operating profit is projected to rise by 26% to 42 billion KRW, slightly below consensus."

Researcher Jeong explained, "The key investment point is rapid expansion in overseas markets, but recently, the strong performance of the domestic business has become the main driver of earnings growth."

He analyzed, "Considering that the domestic business profit in the second quarter only marginally improved despite top-line growth due to a sharp increase in bad debt expenses related to special affiliates, a significant stock price rebound is expected if profitability stabilization is confirmed in the second half."

Looking at the third-quarter earnings preview, sales in China are expected to decrease by 13% year-on-year to 107.6 billion KRW, with a net loss of 4.2 billion KRW, indicating a return to losses. Researcher Jeong evaluated, "In online transactions, a decrease in new orders and sluggish market conditions raise concerns about an increase in allowance for doubtful accounts. Considering the expansion of sales personnel and interest expenses, a net operating loss is anticipated."