[Edaily Reporter Shin Ha-yeon ] On the 28th, Yuanta Securities Korea analyzed that while Cosmecca Korea’s ( COSMECCA KOREA CO.,LTD.(241710)) third-quarter operating profit is expected to fall short of market expectations, this is due to a delay in the recognition of revenue for certain shipments rather than a slowdown in demand. The firm assessed that medium- to long-term growth prospects remain valid, supported by robust orders from its domestic subsidiary and the production of new products at its U.S. subsidiary. It maintained its “Buy” investment rating and raised the target price from 120,000 won to 150,000 won.

Lee Seung-eun, an analyst at Yuanta Securities Korea, projected COSMECCA KOREA CO.,LTD.’s third-quarter consolidated revenue at 214.3 billion won, an 18% increase year-over-year, and operating profit at 30.2 billion won, an 11% increase. The operating profit margin is expected to be 14%. Operating profit is estimated to fall short of market expectations of 33.1 billion won.

The domestic subsidiary is expected to continue its robust growth trend. For the third quarter, the Korean subsidiary’s revenue is projected to reach 175 billion won, a 35% year-over-year increase, with operating profit estimated at 23.3 billion won. The operating profit margin is expected to be around 13.3%.

However, analysts noted that despite steady orders from major clients, supply disruptions for packaging materials such as containers and pouches could cause the production and delivery of some volumes to be pushed back to the fourth quarter.

The analyst explained, “While orders from major clients remain robust, supply disruptions for packaging materials—such as containers and pouches—may cause the production and delivery of some shipments to be deferred to the fourth quarter.”

The U.S. subsidiary is expected to experience negative growth in the short term. Third-quarter revenue for the U.S. subsidiaries, including Englewood Lab, Inc., is projected to be 50.3 billion won, down 19% year-over-year, with operating profit estimated at 8.4 billion won. The operating profit margin is estimated at 16.7%.

In particular, large-volume orders from Englewood Lab, Inc. Korea’s major clients are expected to be postponed until next year. However, the firm noted that new products currently under discussion between Englewood Lab, Inc.’s separate U.S. subsidiary and Englewood Lab Korea are also expected to begin production next year, indicating that future growth drivers remain valid.

The Chinese subsidiary is expected to require more time to recover. Third-quarter revenue is projected to decline by 2% year-over-year to 8 billion won, while the operating loss is expected to widen to 1.6 billion won. The analyst noted, “Although the company is working to expand its base of local brand clients, the pace of revenue recovery remains slow.”

He emphasized that, rather than focusing on the third-quarter results themselves, attention should be paid to the timing when deferred sales volume and new orders are reflected in actual earnings.

The analyst stated, “Third-quarter operating profit will fall short of market expectations, but robust orders from the Korean subsidiary are being partially deferred to the fourth quarter due to container supply disruptions, and production of new products at Englewood Lab, Inc. is expected to begin in 2027,” adding, “Therefore, rather than focusing on the underperformance in the third quarter, attention should be paid to when the revenue from future orders will be reflected in the results.”

The firm also revised its earnings forecasts upward. Yuanta Securities Korea raised its revenue forecast for COSMECCA KOREA CO.,LTD. this year from 799.5 billion won to 838.7 billion won (a 4.9% increase) and its operating profit forecast from 106.0 billion won to 112.4 billion won (a 6.0% increase). For next year, the revenue forecast was raised by 6.4% from 940 billion won to 1 trillion won, and the operating profit forecast was increased by 7.0% from 129 billion won to 138 billion won.

Accordingly, the firm forecasts that this year’s revenue will reach 838.7 billion won—a 30.9% increase year-over-year—and operating profit will rise 34.6% to 112.4 billion won. For next year, revenue is expected to rise 19.2% to 1 trillion won, and operating profit is projected to increase 22.8% to 138 billion won. The operating profit margin is also forecast to improve from 13.4% this year to 13.8% next year.

The target price was raised by 25% from the previous 120,000 won to 150,000 won. This represents an 18% upside potential compared to the closing price of 127,300 won on the 23rd. The target price was calculated by applying a target price-to-earnings ratio (PER) of 18 times to the 12-month forward (12M FWD) earnings per share (EPS).

The analyst explained, “The target PER is based on an average 12M FWD PER of 18 times for the May–September 2024 period, when growth expectations were high due to the company’s products ranking among the top sellers on Amazon and the company posting record quarterly earnings.”