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Capturing US demand with K-beauty technology

Strong sales of at-home beauty devices

APR is the largest manufacturer of at-home beauty devices in Korea. We see robust growth continuing in 2024, backed by new product launches (e.g., Booster Pro and Ultra Tune 40.68) and capacity additions to meet overseas demand. For 2024, we look for device revenue of W368.2bn (+70% YoY), including W152.7bn (+10% YoY) in the domestic market and W215.6bn (+185% YoY) in overseas markets. Looking ahead, we believe the company will continue to aggressively release new products and expand its overseas presence.

The stock pulled back recently due to sluggish US-bound device exports in May. However, shares have rebounded, as export figures (as of Jun. 10) appear to have normalized. The export weakness in May was a temporary issue caused by the transfer of Booster Pro production to APR’s second factory. (Of note, this move also led APR to preemptively increase exports from January to April.) With the ramp-up of the second factory, we expect exports to normalize and earnings to meet expectations. For 2Q24, we look for device export revenue of W83bn (+70% YoY).

Cosmetics also seeing robust growth

Cosmetics make up roughly half of APR’s beauty revenue. Along with beauty devices, cosmetics have seen rapid growth in overseas markets (mainly the US). In 1Q24, overall cosmetics revenue soared 37% YoY (+38% YoY in overseas markets), supported by the flagship brand Medicube. Thanks to its focus on the US market, strong product lineup, and online sales network, we believe APR is benefiting from the same structural growth momentum enjoyed by other Korean beauty brands. For 2024, we look for cosmetics revenue of W291.7bn (+36% YoY).

Re-rating underway in the cosmetics sector; raise TP to W450,000

We believe APR deserves a premium to the industry due to its early lead in at-home beauty devices (a new category for the K-beauty sector). With the overall cosmetics sector enjoying a re-rating fueled by robust export growth (centered on the US market), we raise our target price for APR to W450,000 (from W420,000) and continue to recommend Buy on the stock.