Cosmax’s Global Expansion Hits a Snag: US and China Subsidiaries Fall Short of Expectations

(Source = NH Investment & Securities)

NH Investment & Securities lowered its target price for Cosmax by 10% to 180,000 won on the 23rd, saying that the growth of its U.S. and Chinese corporations fell short of expectations. It maintained its investment opinion as a buy.

Jeong Ji-yoon, a researcher at NH Investment & Securities, said, “Cosmax’s sales in Korea and Southeast Asia are growing rapidly in the third quarter, but the growth of its Chinese and U.S. subsidiaries is falling short of expectations,” adding, “The main reason is the downward revision of the performance estimates for the Chinese subsidiary.”

He continued, “The core investment point of Cosmax is its rapid expansion in overseas markets, but recently, the domestic business performance has become the main driving force behind its performance growth.” He added, “Considering that the domestic business profit only grew slightly compared to its external growth due to the surge in related party bad debt provisions in the second quarter, a significant stock price rebound is expected if the stabilization and improvement of profitability are confirmed in the second half.”

Cosmax’s consolidated sales for the third quarter are expected to be 531.2 billion won, up 16% year-on-year, and operating profit is expected to be 42 billion won, up 26%. Of this, sales in China are estimated to have decreased 13% to 107.6 billion won, and net loss is estimated to have turned into a deficit of 4.2 billion won. These figures take into account a decrease in new orders from online customers, concerns about an increase in bad debt reserves due to sluggish business conditions, expansion of sales personnel, and interest expenses. Sales in the US are expected to increase 1% to 37.3 billion won, and net loss is expected to be 6.7 billion won.