[Click eStock] "Amorepacific, Gradual Earnings Recovery Possible After Q2"

[Asia Economy Reporter Eunmo Koo] NH Investment & Securities forecasted that Amorepacific will inevitably face domestic and international setbacks in the first quarter of this year due to the impact of the novel coronavirus disease (COVID-19), but expects gradual performance recovery from the second quarter onward. The investment opinion and target stock price were maintained at ‘Buy’ and 240,000 KRW, respectively.

On the 21st, Mi-jin Cho, a researcher at NH Investment & Securities, predicted in a report that Amorepacific will gradually recover its performance after the second quarter. Researcher Cho analyzed, “The rapid improvement of local consumption and business environment in China is positive. If structural adjustments such as reducing low-profit offline stores and strengthening digital channel marketing proceed quickly after the second quarter, not only can the performance hit by the COVID-19 crisis recover, but a revaluation of corporate value is also possible.”

It is diagnosed that setbacks in domestic and international markets in the first quarter are unavoidable. NH Investment & Securities estimated Amorepacific’s consolidated sales for the first quarter to be 1.0653 trillion KRW, down 26.6% year-on-year, and operating profit to be 62.7 billion KRW, down 66.4%. Researcher Cho explained, “Due to the Chinese government’s restrictions on foreign entry and additional reductions in flight routes, the downturn at duty-free shops has prolonged more than initially expected, leading to a downward revision of estimates.”

First-quarter duty-free sales are estimated to decrease by 40% year-on-year, and local sales in China by 25%. Researcher Cho explained, “Most offline stores in China resumed operations in March, but shortened business hours and reduced traffic mean it will take time to recover to previous sales levels. Regarding e-commerce, domestic growth rates remain high, and although logistics normalized in China in March, cumulative performance is inevitably down year-on-year.” Since the proportion of pure domestic sales excluding duty-free shops is also significant, it is expected that sales will be heavily impacted by domestic consumption contraction and avoidance of external activities.

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