[Click eStock] "AmorePacific Expected to Report Weak Performance in Q3 Again"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on Amorepacific and set the target price at 180,000 KRW, down 10%.

Shinae Park, a researcher at KB Securities, said, "Investment sentiment is expected to deteriorate inevitably due to the Q2 earnings shock," adding, "The stock price is likely to remain sideways for the time being."

In Q2, Amorepacific recorded sales of 945.7 billion KRW and an operating loss of 19.5 billion KRW. Sales decreased by 20% year-on-year, and operating profit turned to a loss. Sales were 7% below market expectations, and operating profit fell short of the market estimate of 68.4 billion KRW.

Domestic cosmetics sales dropped 15%, and operating profit decreased by 53%. Duty-free sales plunged 44%, while e-commerce sales grew by only 10%.

Sales of the China subsidiary are estimated to have fallen 55% year-on-year, with an operating loss of 55 billion KRW. This was due to the Chinese government lockdowns in April and May and the poor results of the 618 shopping festival. Sulwhasoo sales declined by 50%, and Innisfree and Laneige sales are estimated to have decreased by 75% and 60%, respectively. North American sales grew rapidly by 66%, and operating profit margin is estimated to have remained solid at around 9%. Other Asian sales grew 13%, with an operating profit margin of 8%, turning to a profit compared to the same period last year.

The Q2 performance was much weaker than expected due to the impact of the China lockdown. As Chinese consumption contracted, consumer demand concentrated on top brands due to their aggressive promotions. It is predicted that sluggish sales will continue through Q3 amid ongoing domestic and international uncertainties. Researcher Shinae Park explained, "As the business environment gradually normalizes, sales of the China subsidiary are expected to recover growth from Q4," adding, "From a mid- to long-term perspective, the fixed cost reduction effect based on China's restructuring is also effective."

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