[Click e-Stock] "Cosmax Expected to Deliver Strong Q2 Results... Target Price Raised"

On May 22, Meritz Securities raised its target price for Cosmax from 230,000 won to 258,000 won, citing expectations of improved second-quarter results.

Cosmax succeeded in improving profitability in its Chinese business during the first quarter. Revenue grew by 3% year-on-year, and the operating margin improved by more than 5%.

Park Jongdae, a researcher at Meritz Securities, stated, "The resumption of orders from major offline brands such as Baiqielin is further evidence of the recovery in Chinese cosmetics consumption." He added, "Subsidiaries that had previously been overlooked, such as CM Tech (raw material development) and Cosmax Neo (packaging), generated 4.5 billion won in new operating profit in the first quarter alone, which increases the visibility of Cosmax's performance."

Park predicted that Cosmax would deliver solid results in the second quarter. He said, "Cosmax's standalone domestic revenue growth rate in the first quarter was up 15% year-on-year, but in the second quarter, it is expected to increase by more than 20%, further boosting performance momentum." He explained that this is because Cosmax completed 30% of its annual domestic capacity expansion target early in the first quarter, and the company is expected to benefit from the peak season for sunscreen products.

He continued, "Sunscreen is the area Cosmax is focusing on the most this year," and added, "We expect a significant effect from increased new orders from brands such as Joseonminyeo and Dr.G."

Accordingly, Meritz Securities maintained its buy rating and raised the target price to 258,000 won. Park explained, "The effects of capacity expansion and vertical integration are expected to be significant, and the recovery of the Chinese business is an additional factor for performance improvement."