[Click eStock] "Silicon2, Strong Market Conditions and High Operating Leverage Persist"

On the 15th, Samsung Securities evaluated Silicon Two as having a solid business environment and high operating leverage. The investment opinion was maintained as 'Buy,' but the target price was lowered from the previous 60,000 KRW to 47,000 KRW.

Silicon Two's Q3 results showed sales of 186.7 billion KRW, an 84.9% increase compared to the same period last year, and operating profit of 4.2 billion KRW, a 181.6% increase during the same period. Both figures fell short of market expectations by 10% and 5.6%, respectively. Gayoung Lee, a researcher at Samsung Securities, explained, "The stock price dropped 22.6% on the day of the earnings announcement because most stocks in the cosmetics sector recently reported results that fell short of the market's high expectations, and investors had hoped Silicon Two would deliver another 'surprise.'"

Researcher Lee analyzed that Silicon Two's growth remains solid. He said, "Although sales to the U.S. are growing at a slightly slower rate due to the absolute scale increasing, the overall North American sales growth is steep as operations such as Sukoshimat in Canada have begun in earnest. Additionally, the logistics warehouse purchased in the western U.S. at the end of July is expected to start operating by the end of this year or early next year, enabling more stable top-line growth. Notably, growth is prominent in Europe and the Middle East, where market penetration has begun in earnest, with sales occurring throughout Europe via the logistics warehouse in Poland."

He continued, "Although the target price is lowered reflecting the recent sharp decline in valuation multiples within the cosmetics sector, the export business environment of Korean indie beauty remains solid, and Silicon Two's operating leverage is still high. After excessive expectations are adjusted, a re-rating based on fundamentals will be possible," he forecasted.