[Edaily Reporter Shin Ha-yeon ] On the 9th, HYUNDAI MOTOR SECURITIES assessed that CLIO Cosmetics Co., Ltd(237880)is maintaining a solid profit trend thanks to the restructuring of its domestic low-margin channels and improved profitability in the Health & Beauty (H&B) channel, while the contribution to earnings from the U.S. and Greater China markets is expanding. The firm maintained its “Buy” rating and raised the target price by 21.4%, from 14,000 won to 17,000 won.

Ha Hee-ji, an analyst at HYUNDAI MOTOR SECURITIES, stated, “As CLIO Cosmetics Co., Ltd. streamlines its low-margin domestic channels and improves the profitability of its H&B channels, the company is expected to maintain solid profitability centered on the domestic market, and the expanding contribution from the U.S. and Greater China markets is a positive development.”

CLIO Cosmetics Co., Ltd.’s second-quarter revenue rose 5.7% year-over-year to 86.8 billion won, while operating profit surged 230.1% to 11.6 billion won. The operating profit margin rose to 13.4%.

Domestic sales rose 9.9% year-over-year. The online segment grew 8%, driven primarily by vertical channels, while the H&B channel surged 24%, led by strong sales of new color cosmetics and Gudal sun care products, driving domestic growth.

In particular, analysts note that improved channel mix, alongside revenue growth, led to a recovery in profitability.

Analyst Ha explained, “Profitability improved significantly due to cost reductions resulting from a lower proportion of large-scale collaborations in the H&B channel, as well as improved commission rates stemming from the reduction of low-margin channels such as home shopping and Daiso.”

Overseas sales increased by 1.2% compared to the same period last year. Among these, North American sales rose by 57%, showing the strongest growth among all overseas regions.

Analyst Ha stated, “In particular, the CLIO Cosmetics Co., Ltd. Eye category is making an increasingly significant contribution, and the approximately 5 billion won in second-quarter sales generated through Amazon is a positive development,” adding, “In the second half of the year, we expect the company to expand into offline retail channels such as Costco, Nordstrom, and Olive Young.”

In Greater China, new channel expansion is underway as the contribution from the Gudal Green Tangerine line continues to grow. In contrast, sales in Japan decreased by 30% year-over-year. The firm projected that the impact of scaling back the low-margin Rakuten online channel and organizational restructuring would continue for the time being.

The company anticipates that profit growth will continue in the third quarter. HYUNDAI MOTOR SECURITIES forecasts CLIO Cosmetics Co., Ltd.’s third-quarter revenue to reach 87.7 billion won, a 4.7% increase year-over-year, with operating profit rising 54.3% to 7.3 billion won. The projected operating profit margin is 8.3%.

Domestic sales are expected to increase by 9.1%. Online sales are projected to rise by 24% as growth centered on vertical platforms continues, and the H&B channel is estimated to grow by 10%, driven by the third-quarter peak season effect and the launch of new fall/winter (FW) products.

Analyst Ha explained, “We believe robust profitability will continue in the third quarter as the effects of reduced large-scale promotions in the H&B channel compared to the previous year, as well as the rationalization of inefficient channels such as offline stores, home shopping, and duty-free, become more visible.”

However, overseas sales are projected to decline by 1.1% year-over-year in the third quarter. While U.S. sales are expected to increase by 4.0%, the analysis suggests that expectations should be lowered in the short term due to the base effect from the second-quarter Amazon event and the fact that entries into major offline channels are concentrated in the fourth quarter.

Analyst Ha noted, “For third-quarter North American sales, we need to adjust expectations slightly downward due to the absence of an Amazon event and the fact that entries into major offline channels are concentrated in the fourth quarter.”

In Japan as well, with the impact of organizational restructuring continuing, third-quarter revenue is expected to decline by 14% year-over-year.

Full-year earnings are projected to show a clear recovery in profits. HYUNDAI MOTOR SECURITIES forecasts CLIO Cosmetics Co., Ltd.’s revenue for this year to reach 338 billion won, a 2.7% increase from the previous year, with operating profit doubling to 32 billion won. The operating profit margin is expected to rise from 4.9% last year to 9.5% this year. Net income attributable to controlling shareholders is also estimated to increase by 81.0% to 25 billion won.

The target price increase reflects both improved earnings estimates and a valuation adjustment. The estimated earnings per share (EPS) for this year was raised from 1,160 won to 1,359 won, and for next year, from 1,348 won to 1,451 won. The target price was calculated by applying a 12x multiple to the 12-month forward EPS of 1,428 won, after applying a 40% discount to the average price-to-earnings ratio (PER) of global cosmetics brands.