[Click eStock] "Amorepacific, Expecting Recovery in Chinese Market and New Product Effects... Recommended for Bottom Buying"

[Asia Economy Reporter Myunghwan Lee] Shinhan Financial Investment announced on the 17th that it maintains a buy rating and a target price of 230,000 KRW for Amorepacific. This is because the current stock price is considered a bottom given the recovery conditions in the Chinese market and the effects of new product launches.

Shinhan Financial Investment analyzed that conditions in China, one of Amorepacific's major operating regions, are improving. The lockdown in Shanghai has been easing since the 1st of this month, raising expectations for reopening (resumption of economic activities) in China. The offline store closure rate in China was in the 30% range as of April but showed signs of recovery to around 20% in May. In particular, with the logistics center in Shanghai operating normally from May, it is believed that e-commerce demand could be sufficiently met.

They forecast that sales in the duty-free sector this year will decrease by 42% year-on-year to 146.3 billion KRW, citing a decline in traffic from the first to the second quarter. Since 40% of domestic pure e-commerce sales are reverse direct purchases, mostly from China, the growth rate of domestic e-commerce sales is also expected to have slowed to single digits.

However, they analyzed that Amorepacific's luxury brand 'Sulwhasoo' is driving performance growth through new product launches. The effect of store efficiency improvements domestically and abroad, as well as reductions in labor and other operating costs, is also seen as positive, raising the lower bound of margin levels. Although marketing expenses increased due to new product launches, reductions in labor costs or an increase in the proportion of online sales are changing the margin structure. Shinhan Financial Investment expects that if business conditions recover in both Korea and China, the profit increase effect in the second half of the year could be maximized.

Hyunjin Park, a researcher at Shinhan Financial Investment, said, "(Amorepacific's current stock price) appears to fully reflect the negative factors," adding, "Since earnings expectations for the second half are being maintained, we view the current stock price as a bottom range and prefer a buy strategy."

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