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Ample momentum ahead

1Q24 review: Profitability improves both at home and abroad

For 1Q24, Amorepacific reported revenue of W911.5bn (flat YoY) and operating profit of W72.7bn (+13% YoY), with the latter beating the consensus by a wide margin. Profitability improved markedly, fueled by a 36% YoY rebound in duty-free revenue (domestically) and a narrower loss in China (around W10bn vs. expectation of W20bn). The performance in China was supported by solid online sales of high-margin Sulwhasoo during the International Women’s Day shopping festival (Mar. 8).

The strong performance of COSRX (set to be consolidated in 2Q24) is also encouraging. For 1Q24, COSRX delivered revenue of W156.3bn (growing by double digits) and operating profit of W59.5bn (OP margin of 38%). In addition, with demand set to seasonally strengthen in 2H24, management raised its full-year revenue guidance from W630bn (+30% YoY) to W730bn (+50% YoY).

Ample momentum ahead

We expect the long-awaited consolidation of COSRX to provide strong momentum. COSRX’s earnings will be incorporated from May, contributing partially to 2Q24 earnings (with full recognition in 3Q24). Given COSRX’s strong growth momentum and fundamentals, we expect Amorepacific’s consolidated earnings to meaningfully grow.

We raise our target price to W220,000 (from 180,000), as we revised up our earnings estimates and target multiple in light of the COSRX consolidation. Our target multiple is the stock’s average P/E in 2013-15, a period of rapid overseas expansion (especially in China).