AmorePacific Posts Loss in China... Target Price Lowered to 150,000 Won

[Asia Economy Reporter Park Soyeon] DB Financial Investment has lowered the target price of Amorepacific to 150,000 KRW.

According to FN Guide on the 30th, DB Financial Investment recently stated in a report on Amorepacific, "We have significantly revised down the previously estimated 2022 overseas cosmetics operating profit (90 billion KRW) to a loss and lowered the target price to 150,000 KRW."

Heo Jena, a researcher at DB Financial Investment, said, "With the end of the lockdown in China, the store closure rate in June dropped to the 10% range, but the effect of brand rationalization in China is likely to gradually appear from the fourth quarter after the third quarter," adding, "The performance momentum will be weak for the time being."

Researcher Heo added, "Valuation pressure has increased again, and the stock price is expected to show a sluggish trend," and "We recommend a conservative investment approach."

In April and May, the store closure rate in China recorded 20-30%. Offline sales fell by more than 70%, increasing the burden of fixed costs. In particular, Laneige sales, which had shown high single-digit profitability, fell by more than 60% compared to the same period last year.

The impact of channel rationalization led to a transition to losses. During the 618 event period, maintaining a profitability-focused management policy, all brands inevitably experienced sales declines. As a result, online sales decreased by more than 50%.

Researcher Heo Jena said, "In the third quarter, the Sulwhasoo main product portfolio will also be reorganized," and "With continued channel rationalization across all brands in China, sales are expected to decline by double digits and losses will occur."

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