[Click eStock] Cosmax, Corporate Value Risk Eliminated Following Chinese IPO

On the 13th, Samsung Securities maintained a buy rating and a target price of 185,000 KRW for Cosmax. The target price has an upside potential of 32.1% based on the previous day's closing price.

Park Eun-kyung, a researcher at Samsung Securities, stated, "Although the Chinese subsidiary (Cosmax East) decided on a third-party allotment capital increase, this is essentially a process where the financial investor (FI) who invested in 2019 is replaced by a new FI, so there is no change in fundamentals," adding, "This eliminates the risk of changes in Cosmax's corporate value due to the IPO of the Chinese business."

After the market closed the previous day, Cosmax announced the decision of the Chinese business holding company, 'Cosmax East,' to proceed with a third-party allotment capital increase. This is a follow-up measure to the capital reduction announcement on August 18. Currently, Cosmax East's shareholders consist of Cosmax at 88% and FI at 10.0%, and the existing FI stake will be replaced by a new domestic FI. Cosmax's stake in Cosmax East is expected to slightly decrease from 88% to 86%.

Cosmax attracted FI investment in 2019 and presented an option to recover the investment through the IPO of Cosmax East by July 2023. However, with increasing macroeconomic risks in China, the IPO of Cosmax East no longer serves as a satisfactory investment recovery option for FI. Therefore, FI will recover its investment by accepting a differential capital reduction of Cosmax East, and Cosmax plans to secure the necessary funds for the capital reduction by attracting new domestic FI.

Meanwhile, Cosmax's third-quarter revenue and operating profit forecasts are 434.5 billion KRW (+9.5%) and 33.6 billion KRW (+70%), respectively, indicating a maintained growth trend. Although the operating margin is expected to fall short of 10.9% in the second quarter due to seasonal factors, it is still anticipated to show significant improvement compared to the previous year. Researcher Kim noted, "Despite the ongoing sluggishness in cosmetics consumption in China, the joint venture factory operation with clients will begin in September, which may create an effect of decreased orders from existing clients from a consolidated performance perspective," and emphasized, "It is necessary to lower expectations for the Chinese subsidiary's performance."

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