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Valuation appeal to come into focus

1Q25 review: Strong earnings from Amorepacific and other subsidiaries

For 1Q25, Amorepacific Holdings posted revenue of W1.16tr (+16% YoY) and operating profit of W128.9bn (+55% YoY), mainly driven by strong results from Amorepacific. Even excluding Amorepacific, however, YoY growth was solid (+2% for revenue and +8% for operating profit). Innisfree saw notable improvement in cost efficiency, while Espoir and Etude delivered top-line growth amid increasing brand investments.

Amorepacific recorded revenue of W1.07tr (+17% YoY) and operating profit of W117.7bn (+62% YoY; OP margin of 11%). Laneige led top- and bottom-line growth across most markets, with a new product launched in 1Q25 gaining particularly strong traction in Western markets. In addition, the China business returned to profitability more quickly than expected, and we see the turnaround continuing throughout the year thanks to aggressive cost control.

Innisfree reported revenue of W52bn (-14% YoY) and operating profit of W4.7bn (+134% YoY; OP margin of 9%). While overall revenue continued to decline due to weakening sales in both the duty-free and mono-brand store channels, the pace of top-line contraction slowed (vs. -18% YoY in 3Q24 and -31% YoY in 4Q24), as these channels now account for a smaller share of total revenue. Profitability also normalized thanks to ongoing efforts to improve marketing cost efficiency.

Etude posted revenue of W30.9bn (+3% YoY) and operating profit of W3bn (-41% YoY; OP margin of 10%), while Espoir reported revenue of W21.2bn (+27% YoY) and a slim (breakeven-level) operating profit (-85% YoY; OP margin of 0.2%). Both brands continued to deliver solid top-line growth centered on multi-brand shops, but a temporary rise in marketing expenses (related to new product launches and ambassador campaigns) led to weaker profits.

Rising contribution from Amorepacific; valuation appeal to come into focus

This year, the contribution of Amorepacific to consolidated earnings should increase as its earnings continue to rebound. (Notably, it represented 91% of consolidated operating profit in 1Q25.) Given this dynamic, Amorepacific Holdings essentially shares the same earnings momentum as Amorepacific, yet its 12-month forward P/E (11x) remains at a steep discount to Amorepacific (19x) and the cosmetics sector average (16x). With sentiment on the cosmetics sector improving, we believe the stock’s attractive valuation will come into focus. We maintain our Buy rating on Amorepacific Holdings.