Cosmax: Traditional Leader in Makeup Cosmetics

The creator is an analyst of NH Investment & Securities. She might be reached at [email protected] — Ed.


Well located to profit from rising cosmetics consumption in China, Cosmax is to see strengthening earnings momentum from 2Q21 backed by recovering home demand and anticipated new orders at its US subsidiary in 2H21. It is time to focus extra on the agency’s earnings enchancment.

EV to recuperate on accelerating earnings progress

Reiterating a Buy ranking, we elevate our TP on Cosmax from W145,000 to W160,000 to replicate upward earnings forecast revisions. Following a current rights providing, the agency has suffered deteriorated funding sentiment and weakened supply-demand circumstances. However, in 2H21, we imagine that associated negatives will fade and sound earnings momentum might be highlighted. Backed by: 1) faster-than-expected Chinese consumption growth; and a pair of) speedy home cosmetics demand progress, the core competency of Cosmax, which it has confirmed through unequalled gross sales and technological prowess in line with persevering with cooperation with key manufacturers in the home and Chinese markets, is strengthening additional. Given such, we advise paying nearer consideration to probably earnings enchancment amid bettering business circumstances.

1Q21 earnings topped elevated market expectations

Sales progress expanded in 1Q21, backed by recovering demand for make-up cosmetics each in Korea and abroad. Given that Cosmax provides its merchandise to main shade cosmetics model gamers in Korea and China, its earnings ought to increase in line with total demand progress. We notice that lipstick and lip tint OEM orders at its Chinese subsidiaries started surging from end-2020, and that the robust order development ought to maintain all through 2021. Given that make-up cosmetics orders additionally started rising in Korea from March this yr, we predict that each one subsidiaries will e-book robust gross sales progress in 2021.

Earnings momentum to additional strengthen in 2H21

In 2H21, Cosmax’s consolidated gross sales and OP are to rise 16.7% y-y and106.3% y-y, respectively. In specific, gross sales progress momentum ought to stand out at Chinese subsidiaries provided that amidst sustained cosmetics demand restoration, Cosmax has been strengthening cooperative relations with main native model performs. Meanwhile, the home cosmetics enterprise is to see notable gross sales progress from 2Q21. In the US, rising new orders from international model gamers ought to push up the US subsidiary’s earnings in 2H21.

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