"Cosmetics, Global Expansion Continues... Correction Is a Buying Opportunity"

Korea Investment & Securities analyzed on July 21 that, as the global expansion of the cosmetics sector continues, any market correction should be viewed as a buying opportunity.

Korea Investment & Securities expects the global expansion story of Korean cosmetics, which began in earnest in 2021, to continue this year. Kim Myungjoo, a researcher at Korea Investment & Securities, stated, "It is regrettable that the momentum in the U.S. cosmetics industry has weakened since the second half of last year, but this is being offset by Europe and the Middle East." She added, "In March of this year, 8.1% of the cosmetics imported by the five major European countries came from Korea, which is a 3.3 percentage point increase compared to the same period last year."

However, the recent sharp rise in stock prices over the past one to two months has raised expectations for the earnings of cosmetics companies, which is a concern. She said, "While the momentum in Europe is solid, it inevitably differs from the pace of expansion previously seen in single countries such as China and the United States." She further analyzed, "Although tariff rates may change depending on future tariff negotiations between Korea and the United States, if a 25% tariff is imposed, it could impact the future earnings of companies with a high proportion of exports to the U.S."

Korea Investment & Securities advises that, as the cosmetics sector is achieving greater earnings stability through enhanced global brand recognition and diversification of export regions, any stock price correction should be seen as a buying opportunity.

She said, "Market expectations for the second quarter results of the cosmetics sector are currently very high, and it is noteworthy that only the manufacturers (Cosmax) and distributors (Silicontwo) have experienced a price correction in the past month." She added, "A sector-wide price correction or sideways movement is expected around the time of the upcoming second quarter earnings announcements."

She continued, "During a sector correction, Amorepacific, which has both stable supply-demand dynamics and solid second quarter earnings, is expected to show relatively strong performance." She emphasized, "Dalba Global is pursuing a premium brand strategy and is making various efforts to maintain brand value, so we recommend using any price correction as a buying opportunity."