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Undisputed leader in Korean beauty

2Q25 review: A strong earnings surprise

For 2Q25, APR posted revenue of W327.7bn (+111% YoY) and operating profit of W84.6bn (+202% YoY; OP margin of 25.8%), far surpassing the consensus estimates. Overseas revenue surged 230% YoY, with its share of total revenue rising to 78%.

By region/channel, revenue expanded 286% in the US, 366% in Japan, 537% through B2B channels, and 34% in Greater China. Growth in the US remained robust, with sales through Amazon/TikTok Shop surging an estimated 1,366% YoY. US growth was also fueled in part by initial Ulta Beauty shipments. In Japan, both online and offline channels saw robust growth, with the offline presence of the company’s brands expanding meaningfully. In B2B, strengthened ties with key vendors and robust sell-out trends contributed to strong results (and are continuing to support order growth in 2H25).

In addition, robust revenue growth and lower costs (e.g., reduced spending on promotions due to the off-season) drove strong operating leverage. While costs could increase during the 2H peak season, the impact should be outweighed by top-line growth and mix improvements. As such, we expect margins to stay above 20%.

Emerging as the leader in Korean cosmetics; re-rating underway

We lift our target price on APR to W300,000 (from W170,000) due to the improved outlook for both earnings and valuation. We reiterate our Buy rating on the company.

We revised up our earnings forecasts based on our expectation that the explosive growth seen across key markets/channels (e.g., the US, Japan, and B2B) in 1H25 will continue going forward. Notably, offline channel penetration remains at an early stage, with the share of offline sales in 2Q25 estimated at less than 20% in Japan and less than 3% in the US. This suggests significant upside as offline penetration accelerates, especially given that offline remains the dominant channel in most of APR’s key markets. The firm has only recently begun to ramp up its offline initiatives (scaling up offline/B2B operations in Japan this year and reflecting initial shipments to Ulta Beauty in the US in 2Q25).

We also raised our target multiple, as we expect the stock to re-rate beyond its historical upper range. Previously, there were concerns that muted valuation momentum for legacy cosmetics companies could limit the re-rating potential of the broader sector (including APR). However, we believe that APR’s 2Q25 results have further distanced it from legacy players, positioning it as the sector’s new leader. As a result, we expect APR to raise the valuation benchmark for the overall sector. Of note, our target multiple of 35x is the average multiple of Amorepacific during its China-led growth phase.