[Click eStock] "Amorepacific, at the Beginning of Mid-to-Long-Term Significant Earnings Growth"

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained its buy rating on Amorepacific and kept the target price at 350,000 KRW. This is based on the judgment that demand for the Sulwhasoo brand is increasing in China, channel profitability is recovering, and the company is at the beginning of mid- to long-term earnings growth.

Jomi Jin, a researcher at NH Investment & Securities, said, “The company is implementing different strategies than before across overall business areas, including domestic and international duty-free channel sales structures, responses to various online platforms, and brand development,” adding, “This direction, suitable for consumer trends and business environment, will lead to an increase in corporate value.”

The fact that Amorepacific has a diverse product portfolio is also expected to have a positive effect. While the diverse product portfolio was a burden during the COVID-19 impact period, it can work positively during the demand recovery phase. Researcher Jo explained, “Sulwhasoo’s domestic and international demand continues to grow, and sales of the second brand Laneige and Hera, which has a high proportion of color cosmetics, will increase,” adding, “Innisfree and Aritaum are expected to see sales decline inevitably due to ongoing restructuring.”

The duty-free channel is expected to see an expansion in growth rate as changes in sales strategies become prominent. Since domestic demand has also entered a recovery phase since March, sales in department store channels outside of duty-free are also expected to start turning positive.

On a consolidated basis for the second half of the year, sales and operating profit are estimated to grow by 18% and 405%, respectively. This is because last year’s COVID-19 impact and restructuring-related expenses created a large base effect, and the increase in sales due to demand recovery is expected to be greater than in the first half. Researcher Jo said, “As fixed cost burdens ease, the profit leverage effect will become more prominent as sales increase.”

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