Silicon2 Jumps 7% as Q2 Earnings Beat Forecasts

Shares of Silicon2 rose more than 7% during morning trading on the 14th after the company posted second-quarter earnings that beat market expectations. Expanding K-beauty exports centered on Europe and North America, along with improved profitability, prompted brokerages to raise their price targets one after another.

As of 9:42 a.m. on the 14th, Silicon2 was trading at 43,900 won, up 7.60%, according to the Korea Exchange. The gain is attributed to improved investor sentiment after the second-quarter results announced the previous day far exceeded market forecasts.

Silicon2's consolidated revenue for the second quarter came to 402.6 billion won, up 51.8% from a year earlier. Operating profit rose 59.0% over the same period to 83 billion won, restoring an operating margin of 20.6%.

By region, growth in Europe and North America stood out. European revenue reached 173.4 billion won, up 62% from a year earlier, while North American revenue rose 79% to 87.3 billion won. In Europe, sales to major retailers such as Boots and Superdrug expanded, and in North America, volumes through offline channels including Ulta and Target increased. Revenue in Asia and Latin America also grew 29% and 76%, respectively.

Analysts say the top-line growth and a favorable exchange-rate environment led to the improved profitability. Although logistics costs rose on higher air freight rates, efficient control of selling and administrative expenses helped restore the operating margin to the 20% range.

Brokerages are raising their outlooks. NH Investment & Securities (005940.KS) lifted its price target for Silicon2 by 12.5% to 54,000 won from 48,000 won. The firm raised its revenue estimate to reflect growth in global cosmetics exports and said valuation pressure was low, with the current share price at about 10.9 times its projected price-to-earnings ratio (PER) for this year.

Samsung Securities (016360.KS) also raised its price target by 10% to 55,000 won from 50,000 won. Reflecting the second-quarter results and the potential for expanding operating leverage ahead, it raised its operating profit forecasts for this year and next by 10% and 13%, respectively. Samsung Securities projected that Silicon2's earnings growth would continue as it enters the peak season in the third quarter.