[Click eStock] "AmorePacific Faces New COVID-19 Variable... Impact Assessment Needed"

[Asia Economy Reporter Oh Ju-yeon] Daishin Securities maintained its investment rating of 'Market Perform' and target price of 180,000 KRW for Amorepacific on the 6th, stating that while the continued growth of the domestic duty-free market is positive, the possibility of expanding market share in the Chinese luxury cosmetics market needs to be observed.

Amorepacific's consolidated sales for the fifth quarter of last year were 1.3337 trillion KRW, and operating profit was 45.9 billion KRW, significantly below the consensus operating profit of 70.4 billion KRW. Net profit turned to a loss of 71.3 billion KRW due to impairment costs of overseas loss-making subsidiaries and foreign exchange-related losses.

Domestic cosmetics sales increased by 10% compared to the previous year. By channel, traditional channel sales declined by more than 10% year-on-year, showing significant weakness, especially with a sharp increase in the decline of department store and door-to-door sales channels. Sulwhasoo sales were also sluggish, resulting in domestic Sulwhasoo sales increasing by only 8% compared to the previous year. On the other hand, new channels such as duty-free shops and digital channels are estimated to have grown by 27% and 71%, respectively.

Chinese sales grew by 5% in KRW terms and 2% in local currency terms. By brand, sales were Innisfree -8%, Sulwhasoo +20%, Laneige +8%, and Mamonde -5%, with Sulwhasoo's strong performance and Innisfree's deepening weakness continuing.

Han Yoo-jung, a researcher at Daishin Securities, predicted that Amorepacific may enter a pause period for the time being.

The researcher said, "This year, the combined sales proportion of duty-free shops and digital channels in domestic cosmetics sales is expected to expand to 41.5%, driving overall profitability improvement. While expectations for domestic traditional channels have significantly lowered, the anticipation for new channels remains valid. However, since the impact of the early-year outbreak of the novel coronavirus infection (Wuhan pneumonia) affects not only the duty-free channel but also the Chinese subsidiaries, confirmation of this impact is necessary," she explained.

This content was produced with the assistance of AI translation services.