[Click e-Stock] "Cosmecca Korea, Differentiated Growth on the Wings of K-Beauty"

On the 23rd, Yuanta Securities maintained its "Buy" rating on Cosmecca Korea and raised its target price from 96,000 won to 120,000 won.

On this day, Lee Seungeun, a researcher at Yuanta Securities, said, "The company is moving away from a structure dependent on specific clients and is diversifying its portfolio, and it is showing a differentiated growth rate compared with top-tier original design manufacturing (ODM) companies," adding, "A re-rating of its valuation (share price level relative to corporate value) is possible."

In the fourth quarter of last year, Cosmecca Korea posted revenue of 178.1 billion won, up 39% year-on-year, and operating profit of 20.9 billion won, up 57%. This slightly missed the market consensus operating profit of 22 billion won. The researcher explained, "Although the Korean subsidiary's revenue surged 54% year-on-year, operating margin remained at 9% as about 5 billion won in one-off costs, including depreciation related to the relocation of the Pangyo Central Research Institute, quality assurance expenses, and incentive provisions, were reflected."

Englewood Lab improved its profitability, recording consolidated revenue of 54.5 billion won and operating profit of 9.3 billion won. Englewood Lab Korea showed high profitability with an operating margin of 34% as the effects of automation facility investments began to materialize in earnest, and the Chinese subsidiary also turned profitable, recording revenue of 8.5 billion won.

This year's earnings outlook is positive. Cosmecca Korea presented guidance (its own forecast) for this year of 15% year-on-year growth in consolidated revenue and an operating margin of 13%. Researcher Lee said, "In the first half, the Korean subsidiary will drive earnings through increased volumes related to K-beauty indie brands, and in the second half, Englewood Lab will lead results along with improved profitability stemming from the stabilization of automation facilities."

He continued, "The Korean subsidiary is expected to break away from the typical off-season pattern in the first quarter and maintain a growth trend throughout the year as the flow of K-beauty orders continues. It is pushing for a phased expansion of production capacity centered on the Cheongju plant and an increase in the proportion of high value-added products," adding, "The Chinese subsidiary is aiming to reach break-even for the full year by cutting fixed costs."