[Click eStock] "AmoreG, Expecting AmorePacific Profit Growth in Second Half"

Published 13 Apr.2022 07:16(KST)

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on AmoreG on the 13th and set a target price of 56,000 KRW, down 3%.

Shinae Park, a researcher at KB Securities, said, "A temporary performance deterioration is inevitable due to China's COVID-19 lockdown measures," adding, "This has been largely reflected in the recent stock price slump, and it is still reasonable to maintain expectations for earnings growth for AmorePacific."

[Click eStock] "AmoreG, Expecting AmorePacific Profit Growth in Second Half"

Considering the impact of China's stringent COVID-19 prevention measures, KB Securities lowered its operating profit forecast for its subsidiary AmorePacific by 8% for this year. However, from the third quarter, both sales and consolidated operating profit of the Chinese corporation are expected to return to growth compared to the same period last year. In the first half of this year, intensive restructuring of Innisfree stores in China is expected to materialize fixed cost reduction effects. Although sales recovery for Innisfree and Etude is slow, profitability is expected to improve through e-commerce and H&B store expansion and marketing cost efficiency.

Researcher Shinae Park said, "Innisfree's sales this year are expected to decline by 6%, and operating loss will be about 1 billion KRW, similar to last year," adding, "Etude's sales will decrease this year, but operating loss is expected to reduce by 4.9 billion KRW compared to last year, recording 4.7 billion KRW."

AmoreG's consolidated sales in the first quarter are expected to decrease by 3% year-on-year to 1.3472 trillion KRW. Operating profit is forecasted to drop 37% to 125 billion KRW. AmorePacific is expected to record sales of 1.2313 trillion KRW and operating profit of 117.5 billion KRW, down 2% and 33% respectively from the same period last year. E-commerce sales are expected to grow by 22%, but duty-free store sales are projected to decline by 14% due to weakened demand from peddlers caused by China's strict COVID-19 prevention measures.

Innisfree's operating profit is estimated to fall 61% to 3.7 billion KRW due to a decrease in the number of stores and poor customer traffic. Etude is expected to record an operating loss of 800 million KRW. Although the number of specialty and duty-free stores is decreasing, growth in e-commerce and H&B store channels is expected to partially offset this.