[Click eStock] "AmorePacific, More Negative Factors in Q2 than Q1... Target Price Down"

[Asia Economy Reporter Koo Eun-mo] DB Financial Investment forecasted that Amorepacific will continue to face market headwinds due to deteriorating performance in the second quarter of this year and sluggish overseas exports. The investment opinion was maintained as 'Buy,' but the target price was lowered from the previous 220,000 KRW to 200,000 KRW.

On the 17th, Park Hyunjin, a researcher at DB Financial Investment, stated in a report, "There was an expectation that the domestic economy would recover as social distancing measures eased, which was generally positive for consumer goods companies, but it seems there are limitations for cosmetics and household goods companies." He estimated the operating profit for the second quarter to be 40.2 billion KRW, down 5.42% year-on-year, lowering it by more than 20 billion KRW from the previous estimate.

Researcher Park explained, "With mask-wearing becoming mandatory and the weather rapidly getting hotter, the sector's off-season cycle has accelerated compared to usual years, and the cycle's fluctuations are deeper than expected. Despite efforts to optimize stores in specialty channels (from 980-990 stores in 2019 to an expected mid-800s in 2020), the operating loss trend continues, and sales declines in department stores and mart channels during April and May are still ongoing." He added that duty-free sales have only maintained March traffic and per-customer sales trends, resulting in a roughly 50% decrease in sales during April and May.

Overseas profit sluggishness is also expected to continue. In China, while Sulwhasoo's sales reversed to growth in April and May, Innisfree's sales declined, leading to an overall weak sales performance in China. Researcher Park predicted, "Offline stores in Asian regions outside China are not fully operating normally, so Asia sales in the second quarter will decrease year-on-year and maintain operating losses." Furthermore, he analyzed that North America and Europe are also unlikely to contribute positively to overseas performance due to worsening offline store sales. Park forecasted, "The most critical factor is whether Innisfree, which accounts for a large portion of overseas sales, can improve its performance, but this is unlikely in the short term."

The investment opinion was maintained as 'Buy,' but the target price was lowered from the previous 220,000 KRW to 200,000 KRW. Researcher Park explained, "Contrary to expectations of a 'V'-shaped rebound in quarterly performance after the COVID-19 shock, disappointing results are anticipated, which will likely increase downward pressure on the stock price in the short term."

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