[Click e-Stock] "Cosmecca Korea to Accelerate Growth from Q3"

Kiwoom Securities recommended buying Cosmecca Korea at a low point on June 20, stating, "From the third quarter onward, the domestic and US subsidiaries are expected to drive growth." The target price was maintained at 85,000 won.

Cosmecca Korea's performance is currently passing through its lowest point. Second-quarter revenue is expected to reach 146.1 billion won, with operating profit at 16.6 billion won, representing a 2% increase and an 8% decrease year-on-year, respectively. The main reasons cited were delays in delivery by the domestic subsidiary, base effect burdens, and profit decline due to performance bonuses. Revenue from the domestic subsidiary in the second quarter is projected at 89.9 billion won, with operating profit at 11.2 billion won.

Additionally, the US subsidiary is expected to see revenue of 51 billion won and operating profit of 5.7 billion won, representing increases of 11% and 33% year-on-year, respectively. Jo Sojeong, an analyst at Kiwoom Securities, explained, "With the base effect burden easing and major clients depleting their inventories, order intake is expected to rise significantly." The Chinese subsidiary is projected to record revenue of 8.7 billion won and an operating loss of 500 million won, with continued deficits anticipated. The lack of hit products is cited as the reason for declining sales.

However, a rebound is anticipated from the second half of the year. Analyst Jo emphasized, "In Korea, orders delayed in the first half will be converted to production in the second half, and orders from indie beauty clients are expected to drive growth." She continued, "Orders from global clients could serve as a variable for additional growth. Since global clients typically place large orders, this could be an opportunity for a significant increase in sales."

In the US as well, the depletion of inventories by major clients is resolving, and orders are expected to increase. Sales had declined due to delayed inventory depletion by major US indie beauty brands, but this issue is gradually being resolved. Analyst Jo also noted, "SUN orders from domestic indie beauty clients are expected to contribute to performance growth," and diagnosed, "Orders for high-SPF (50 or above) products from indie beauty brands are increasing."

Accordingly, revenue in 2025 is projected to increase by 13% to 592.2 billion won, and operating profit is forecast to rise by 13% to 68.4 billion won.

She added, "The current share price is at a 12-month forward PER (price-to-earnings ratio) of 12 times. Considering that cosmetics ODM peers are trading at 15 to 20 times, the valuation is sufficiently attractive."