[Click eStock] Cosmax, Attractive Valuation... Stock Price Expected to Recover

Korea Investment & Securities maintained its target price of 200,000 KRW and a 'Buy' rating for Cosmax on the 12th, stating that the company's third-quarter operating profit met market expectations.

In a report released that day, Kim Myung-joo, a researcher at Korea Investment & Securities, said, "Cosmax's third-quarter consolidated sales increased by 15.6% year-on-year to 529.8 billion KRW, and operating profit grew by 30.4% to 43.4 billion KRW, with both sales and operating profit meeting market expectations and consensus estimates." He analyzed, "It is positive that the bad debt write-off related to accounts receivable, which the market was concerned about, significantly decreased compared to the previous quarter, but operating profit met market expectations as other selling and administrative expenses were higher than expected."

During the same period, sales of the Korean subsidiary increased by 20.8% to 347.8 billion KRW, and operating profit rose by 52.7% to 39.5 billion KRW, meeting market expectations. The performance of the Chinese and U.S. subsidiaries was weaker than market concerns. Fortunately, the results of the Indonesian and Thai subsidiaries offset the weaknesses in China and the U.S. Researcher Kim explained, "The operating profit margins of the Indonesian and Thai subsidiaries are both estimated to be around 10%, which is a factor for the company's medium- to long-term valuation increase."

Researcher Kim forecasted that investment sentiment in the cosmetics sector would be difficult to improve in the short term. He pointed out, "The third-quarter results of cosmetics companies, excluding Cosmax, fell short of market expectations," and added, "At the same time, macroeconomic uncertainties have increased, significantly damaging recent sentiment in the cosmetics sector."

He continued, "Since Cosmax's third-quarter results did not exceed market expectations, it is insufficient to improve sector sentiment, but depending on bad debt write-offs and other factors, the investment sentiment of individually damaged companies is expected to improve."

Although the visibility of estimates regarding bad debt write-offs reflected in selling and administrative expenses remains low, the company is currently strictly managing bad debt write-offs related to accounts receivable. As a result, the amount written off in the third quarter actually decreased, according to Researcher Kim.

He predicted, "The company's valuation appeal is expected to be highlighted again, and accordingly, the stock price is expected to show a recovery trend."