[Click E-Stock] "DongKook Pharmaceutical Target Price Raised on Cosmetics Segment Growth"

Sangsangin Securities announced on the 24th that it is maintaining its "buy" investment rating on DongKook Pharmaceutical and raising its target price to 30,000 won.

Ha Tae-gi, an analyst at Sangsangin Securities, said, "Compared with DongKook Pharmaceutical's growth potential, its share price is significantly undervalued," adding, "Based on this year's estimated earnings, its price-to-earnings ratio (PER) is only 11.8 times. This is low considering that Amorepacific is at 31 times and LG Household & Health Care is at 35 times."

He went on, "In terms of the broader trend, the share price can be said to be in a long-term correction range," adding, "Despite an improvement in operating performance in 2024, the share price fell to around 14,000 won in February last year, but on expectations of earnings growth it has recovered to the 20,000 won range as of late this month."

Ha projected that the growth rate of DongKook Pharmaceutical's cosmetics segment will increase. He explained, "This year, cosmetics exports are expected to grow by more than 100%, backed by a competitive edge in quality and the popularity of K-beauty," adding, "Healthcare sales, including cosmetics, are expected to drive the company's overall revenue growth this year."

He said, "Last year, sales in the beauty segment within healthcare are estimated to have grown 17% to 239.5 billion won, and total sales of the healthcare business are estimated to have grown 14.8% to 314 billion won, with growth rates in both the domestic and export segments increasing," adding, "In particular, export sales centered on online channels appear to have grown by the mid-80% range year-on-year last year, approaching 30 billion won."

He added, "Recently, DongKook Pharmaceutical's major cosmetics brands have entered the top ranks of detailed subcategories in the beauty section on Amazon in the United States," and analyzed, "This year as well, by strengthening online marketing toward North America, Japan, and China and expanding offline exports through business-to-business (B2B) deals with global cosmetics distributors, margins are expected to improve."

Exports of DongKook Pharmaceutical's healthcare products have become visible since last year. Ha said, "The healthcare business accounted for 34.2% of annual sales last year and is leading the company's overall revenue growth," adding, "From 2019 to last year, the beauty segment's compound annual growth rate was 15.03%. Up until 2024, growth was centered on the domestic market, but since last year, meaningful changes have been emerging on the export side."