[Click eStock] "Amorepacific, Short-term Stock Price Upside... Target Price Up 11%"

Meritz Securities Report

[Asia Economy Reporter Minji Lee] Meritz Securities on the 10th raised the target price for Amorepacific to 190,000 KRW, an 11.7% increase from the previous target, citing short-term stock price gains expected due to improvements in the Chinese market conditions and growth in the duty-free sector. However, the investment rating was maintained as neutral, anticipating intensified competition with China in the mid to long term.

Amorepacific recorded sales of 1.3247 trillion KRW and an operating profit of 25.6 billion KRW in the fourth quarter. Sales grew 14% year-on-year, and operating profit turned positive. A net loss of 42.5 billion KRW was reported, significantly below market expectations due to the reflection of one-time costs.

In the domestic cosmetics sector, sales reached 689.7 billion KRW and operating profit was 41.8 billion KRW, marking a 31.1% increase and a turnaround to profitability compared to the same period last year. The duty-free sector grew 24.2% due to a low base effect, and the online sector also grew by 50%. The non-duty-free sector increased by 20.1%, turning to growth for the first time in 22 quarters due to increased sales per store. The household goods sector recorded sales of 109.3 billion KRW, a 20.9% increase from a year earlier, but an operating loss of 7.8 billion KRW. Hanuri, a researcher at Meritz Securities, explained, “Demand for high-priced products drove sales improvement, while fostering premium products and expanding promotions led to increased costs.”

In the overseas sector, China recorded sales of 352.7 billion KRW and an operating loss of 26.5 billion KRW. Innisfree experienced an 80% decline due to poor sales and increased marketing expenses. Sulwhasoo showed strong performance with 30% growth. The MBS (Multi-Brand Shop) channel also performed well in Europe (15.5%) and the United States (83.8%) due to the entry effect of stores like Sephora.

The stock price is expected to continue its upward trend for the time being. Considering only the fourth-quarter duty-free performance, Amorepacific showed relatively better results compared to LG Household & Health Care (-39%). In the Chinese market, Sulwhasoo grew by 30%, outperforming Whoo (16%). Hanuri analyzed, “The lifting of movement restrictions on Chinese people following the closing of the Beijing Winter Olympics on the 20th of this month and the expected domestic demand stimulation policy around the Two Sessions on the 4th of next month are factors supporting the stock price rise.” However, due to high base effects on earnings, the investment rating remains neutral. The researcher added, “Concerns over margin contraction due to operating shrinkage in Daigo and intensified competition with China still persist.”

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