[Click eStock] "Cosmax, Expanding Contribution of China Subsidiary's Performance... Target Price Up 3%"

Hyundai Motor Securities Report

[Asia Economy Reporter Minji Lee] Hyundai Motor Securities maintained a buy rating on Cosmax on the 12th and raised the target price by 3% from the previous level to 175,000 KRW.

Cosmax recorded consolidated sales of 430.4 billion KRW and operating profit of 43.9 billion KRW in the second quarter, up 13.5% and 67.5% respectively compared to the same period last year. The improvement in both sales and profitability of the China subsidiary drove overall performance growth. Looking at Cosmax separately, sales increased by 10% to 230 billion KRW, while operating profit decreased by 1.5% to 20.4 billion KRW. Despite the removal of the high-margin hand sanitizer effect, the separate entity recorded an OPM of 8.9%, demonstrating improved profit resilience.

Sales of the China subsidiary grew by 33% compared to a year ago. Sales in the Shanghai market reached 140.4 billion KRW, a 43% increase from the same period last year, and Guangzhou recorded 36.2 billion KRW, up 9%. Hyeyjin Jung, a researcher at Hyundai Motor Securities, said, “The expansion of online customers and strong volume from the 618 shopping festival led to improvements in both top line and profitability,” adding, “It is understood that online-based and new client orders, including local pigment brands, continue to perform well.”

Sales in the United States decreased by about 12%. However, it is expected to show gradual improvement in the second half of the year as major orders are reflected. Looking at sales by subsidiary, USA recorded 15 billion KRW, down 21% from the same period last year, and NuWorld recorded 19.4 billion KRW, down 9.4%. Researcher Hyeyjin Jung explained, “The NuWorld ODM contract change was completed within the second quarter, resulting in a one-time cost of 5.3 billion KRW,” adding, “While the impact on operating profit will be removed in the future, impairment loss on unamortized goodwill (expected 40 billion KRW) is likely to be reflected in the fourth quarter.”

Looking at sales of Southeast Asian subsidiaries, Indonesia recorded 10 billion KRW and Thailand 4.6 billion KRW, down 8% and up 1.2%, respectively. The local Southeast Asian market is expected to gradually improve performance as the impact of COVID-19 eases.

Researcher Hyeyjin Jung said, “While China’s performance showed solid growth, the effect of improved profit resilience of the Korean subsidiary and the reduction of losses in the US subsidiary are expected to become more prominent after the second half of the year,” adding, “After the one-time operating loss related to the US subsidiary occurs, the related profit and loss are expected to be removed, and the target price was raised considering next year’s net income attributable to controlling interests.”

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