[Into the Stocks] Before Even Taking Off Masks... Can AmorePacific Repeat Its 'Surprise Earnings' Glory?

[Asia Economy Reporter Ji Yeon-jin] Can Amorepacific regain its former glory? With the outdoor mask mandate lifted starting this month, attention is focused on whether Amorepacific's corporate value will rise again.

According to the Korea Exchange, Amorepacific rebounded within about one minute of the market opening on the KOSPI today and has been fluctuating within a stable range since. Although the opening price slightly declined due to foreign investors' sell-off ahead of the U.S. Federal Reserve's 'big step' of raising the benchmark interest rate by 0.5 percentage points this month, the easing of social distancing policies that no longer require mandatory mask-wearing outdoors was implemented for the first time today, showing signs of recovery in cosmetic investment sentiment.

The company had already demonstrated reopening benefits in its performance even before the mask mandate was lifted. Operating profit in the first quarter of this year was 158 billion KRW, down 10% year-on-year but significantly surpassing market expectations of 125 billion KRW, marking an earnings surprise. During this period, sales at duty-free shops and in China decreased by 42% and 10%, respectively, resulting in sluggish performance, but pure domestic sales grew by 13.8%, with online sales especially growing by about 20%. Moreover, Sulwhasoo sales in China, where COVID-19 lockdowns resumed last month, increased by 8%, and North American sales rose by 63%, raising expectations for overseas business.

Amorepacific was considered a blue-chip stock in 2015 when it was growing rapidly in the Chinese market, with duty-free and China accounting for nearly 50% of total sales and its stock price exceeding 3 million KRW per share. However, after China banned Korean content and Hallyu culture in 2016 under the 'Hallyu ban' (Hanhanryeong), the stock price continued to decline. On May 28 last year, when COVID-19 vaccinations began, reopening expectations surged, pushing the price up to 300,000 KRW during the day, but it weakened again due to the spread of COVID-19, falling to 144,000 KRW on January 10 this year.

Park Jong-dae, a researcher at Hana Financial Investment, said, "If last year's fourth-quarter results hinted at the 'possibility' of business structure improvement for a turnaround, this time it can be seen as proof of the 'completion' of business structure improvement," adding, "It is time to gradually increase the weighting while waiting for the resolution of uncertainties in Chinese consumption." However, Jeong So-yeon, a researcher at Kyobo Securities, said, "While a rebound in the cosmetics industry is expected this year due to reopening, Amorepacific's performance rebound is also expected to continue," but added, "Although it is a time when a rebound in the stock price, which has fallen about threefold from the 2015 peak, is anticipated, the ongoing spread of COVID-19 in China remains an uncertainty factor, so a cautious approach is necessary."

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