Daol Investment & Securities reported that Cosmax exceeded market expectations in the third quarter, driven by growth in domestic and international operations, maintaining a 'buy' rating and a target price of 350,000 won.
Park Jong-hyun, an analyst at Daol Investment & Securities, stated, "The strong growth of the Korean subsidiary, led by skincare and small-sized products, resulted in a third-quarter operating profit that surpassed consensus estimates by 7%. Even excluding bad debt recovery, the results align with our projections, and we expect the operating profit margin (OPM) in Korea to remain in the low 10% range."
Cosmax reported consolidated sales of 875.8 billion won for the third quarter, a 49.6% increase compared to the same period last year. Operating profit rose to 83.3 billion won, marking a 95.0% increase and exceeding market forecasts. The operating profit margin was 9.5%, up 2.2 percentage points from the previous year.
Notably, the growth of the Korean subsidiary was remarkable. Sales in Korea reached 616.1 billion won, a 61% increase year-on-year, with an operating profit margin of 11.0%. Skincare and exports drove this growth, while the color cosmetics segment also recovered to double-digit growth rates.
International subsidiaries continued their growth trajectory as well. Sales from the U.S. subsidiary increased by 88% compared to the previous year, while sales from the Chinese subsidiary rose by 29%. However, despite an increase in operating profit due to the expansion of indie brands, the Chinese subsidiary still recorded a net loss of 2.6 billion won.
Daol Investment & Securities anticipates continued improvement in performance for the fourth quarter, projecting sales of 848.4 billion won, a 41% increase year-on-year, and operating profit of 67.3 billion won, up 65%.
The growth outlook for next year is also positive. With the Korean subsidiary's utilization rate reaching the high 80% range, the main constraint on growth is expected to be production capacity rather than demand. An anticipated 10% increase in production capacity in January is expected to provide additional growth potential.
Park stated, "We maintain our target price of 350,000 won, applying a 40% discount to the average price-to-earnings ratio (PER) of global cosmetics companies, along with a buy rating for 2027."
* This article has been translated by AI.
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