Cosmetics stocks rallied across South Korea's stock market as strong K-beauty exports met expectations of improving earnings. Cosmecca Korea (241710.KQ) drew particular investor attention, surging more than 15% in a single day after posting record second-quarter results and confirming rising exports.
Cosmecca Korea, a cosmetics original development manufacturer (ODM), closed the previous session at 109,400 won, up 15.16% from the prior day, according to the Korea Exchange on the 12th. During the session, the stock jumped as much as 22.95% to 116,800 won, setting a new 52-week high. Other cosmetics stocks also closed higher, including Dalba Global (1.86%), Kolmar Korea (1.89%) and Amorepacific (1.10%).
The most direct driver behind the gains was strong exports. Cosmetics exports totaled $341 million during the first 10 days of the month, up 92.2% from a year earlier, according to the Korea Customs Service. The figure marked a ninth straight month of year-on-year growth since last November, while expectations are also rising that sales channels could expand into the European market following the United States.
Cosmecca Korea, in addition to higher exports, also far exceeded market expectations with its second-quarter results. Consolidated revenue rose 39.8% from a year earlier to 226.1 billion won, while operating profit rose 39.3% to 32.1 billion won. Operating profit in particular topped market estimates by 15.7%, a record high.
Brokerages have also raised their expectations for the company's earnings and value. Seven brokerage reports lifting Cosmecca Korea's target price were released on the 11th alone. Kyobo Securities raised its target price to 150,000 won from 130,000 won and maintained a "buy" rating, citing the potential for a further valuation re-rating once a more diversified client base and rising sales of flagship products are reflected.
Kyobo Securities forecast Cosmecca Korea's revenue this year at 860.7 billion won, up 34.4% from a year earlier, and operating profit at 117.7 billion won, up 41.0%. It projected that revenue would reach 1.033 trillion won next year, topping 1 trillion won for the first time. "Cosmecca Korea's revenue growth is significantly outpacing the growth rate of K-beauty exports," Kyobo Securities analyst Kwon Woo-jung said. "This is not growth dependent on a few large clients, and the improvement in profitability driven by operating leverage is also positive."
Across the sector, expectations are growing that the export momentum will continue. The industry is watching the potential for K-beauty sales channels to expand into Europe as well as the United States. While sales performance has varied by brand across online channels, the broadening of K-beauty's contact points with overseas consumers is seen as a common positive.
"Led by Cosmecca Korea, which posted strong results and set a record high, the cosmetics sector as a whole closed higher," KB Securities analyst Lim Jung-eun said. "We should watch whether the recent solid share performance of the cosmetics and beauty-device sector continues as further earnings from companies such as Kolmar Korea and Classys are confirmed."
