[Edaily Reporter Kim Kyung-eun ] On the 7th, Meritz Securities raised its target price for COSMAX, INC.(192820)by 9.1% from 330,000 won to 360,000 won, citing expectations that the company will post third-quarter earnings that exceed market expectations. The firm maintained its “Buy” rating. This represents an upside potential of 20.8% compared to the previous day’s closing price of 298,000 won.

Park Shin-ae, an analyst at Meritz Securities, stated in a report released today, “Driven by the global expansion of K-Beauty, domestic subsidiaries are leading earnings growth, and this year, overseas subsidiaries are also expected to post strong double-digit sales growth across the board.”

COSMAX, INC.’s consolidated third-quarter revenue is projected to reach 815.5 billion won, up 39.3% year-over-year, while operating profit is expected to rise 79.7% to 76.8 billion won. Compared to the market consensus, revenue is expected to exceed estimates by 6.7% and operating profit by 13.4%. The operating profit margin is forecast to rise by 2.1 percentage points to 9.4% from 7.3% in the same period last year.

The domestic subsidiary is at the heart of this earnings improvement. Third-quarter standalone domestic revenue is projected to reach 563.7 billion won, a 47.0% increase year-over-year. Analysts attribute this to the accelerated growth of top-tier skincare brands driven by expanded exports from K-Beauty clients, as well as a return to growth in color cosmetics sales, which had been sluggish over the past four quarters.

Although the third quarter typically has fewer operating days due to summer vacations and the Chuseok holiday, revenue is forecast to rise by 9% compared to the previous quarter. Driven by an improved product mix resulting from an increased focus on the relatively high-margin skincare segment, the domestic subsidiary’s operating profit is expected to reach 58.1 billion won, a 69.2% year-over-year increase.

Growth at the U.S. subsidiary is also expected to be notable. With robust growth from existing brands combined with strong growth from indie brands, third-quarter U.S. sales are estimated to reach 64.5 billion won, a 74.7% increase year-over-year. The operating profit margin is also projected to reach around 5%, continuing the trend of profitability that began in the second quarter.

In particular, the U.S. subsidiary is expected to post its first annual operating profit this year. While annual revenue remained in the 100 billion won range from 2018 through last year, it is projected to exceed 200 billion won for the first time this year, reaching 222 billion won—a 67.4% increase year-over-year.

The Chinese subsidiary is also expected to continue its recovery. Third-quarter revenue in China is projected to reach 175.7 billion won, a 25.5% increase year-over-year. Annual revenue for this year is forecast at 768.9 billion won, signaling a break from the stagnation in the 550–630 billion won range that has persisted since 2021.

Accordingly, Meritz Securities raised its operating profit forecasts for COSMAX, INC. this year and next to 271.9 billion won and 339.9 billion won, respectively—up 5.9% and 7.4% from previous estimates. Operating profit is projected to increase by 38.9% year-over-year this year and by 25.0% next year.

Analyst Park stated, “Although the stock price has risen 77% since the beginning of the year, the current price is at a 12-month forward price-to-earnings ratio (P/E) of 16.6 times, so the valuation pressure relative to earnings growth is limited,” adding, “As the upward trend in earnings estimates continues, the stock price is also expected to maintain its upward trajectory.”