[Click eStock] "AmorePacific, Rapidly Increasing Profitability"

Yuanta Securities "Amorepacific Target Price Raised to 360,000 Won"
Expansion of High-End Cosmetics Share... "This Year Marks the Start of Profitability Increase"

[Asia Economy Reporter Gong Byung-sun] Amid rapidly rising profitability, Amorepacific's first-quarter earnings this year exceeded market expectations (consensus). On the 29th, Yuanta Securities raised the target price for Amorepacific from 330,000 KRW to 360,000 KRW while maintaining a 'Buy' rating.

This year, Amorepacific is expected to see a sharp increase in profitability due to the expansion of high-end cosmetics and channel efficiency improvements. In the first quarter, high-end cosmetics accounted for about 48% of Amorepacific's sales. This is an 8 percentage point increase from the 40% share during 2018-2020. Yuanta Securities analyst Park Eun-jung stated, "The share of Sulwhasoo has started to rise in China, and duty-free sales are expected to hit their lowest point in the first quarter of the year," adding, "The rise in Amorepacific's profitability, focused on the growth of high-end cosmetics, is just beginning this year." Yuanta Securities forecasts Amorepacific's consolidated operating profit this year to reach 637.5 billion KRW, a 346% increase compared to the previous year.

At the early stage of recovery this year, the company posted results exceeding expectations. Amorepacific's first-quarter sales reached 1.2528 trillion KRW, an 11% increase year-on-year. Operating profit was 176.2 billion KRW, up 189% from the same period last year, surpassing the consensus by 20%. Analyst Park explained, "Sales increased for the first time since COVID-19, and the operating margin rose by 9 percentage points year-on-year to 14%, settling into double-digit profitability."

High-end cosmetics also stood out in domestic segment performance. Sales in the high-end cosmetics sector grew 17% year-on-year. The core brand Sulwhasoo grew by 33%, with its contribution rising 8 percentage points year-on-year to 41%. Digital and duty-free channels grew by 30% and 18%, respectively. Due to COVID-19 and channel restructuring, premium and daily beauty segments declined by 2% and 6%, but the operating margin improved by 5 percentage points year-on-year to 17%. Analyst Park noted, "This is mostly due to reduced selling and administrative expenses from restructuring."

Overseas performance also exceeded consensus. The operating margin increased by 20 percentage points year-on-year to 12%, surpassing expectations. Sales growth rates by region were Asia 22%, Europe 7%, and North America -7%. High-end cosmetics also drove external growth overseas. For example, the Chinese subsidiary's sales rose 35% year-on-year, with Sulwhasoo's sales growth rate reaching 80%.

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