"K-Beauty Booms in US and Europe... Time to Reconsider Cosmetics Stocks After Price Drop" [Click e-Stock]

Cosmetics Exports in May Reach Second-Highest Level on Record

"APR and Dalba Global Remain Top Picks"

Securities analysts have recently assessed that the recent decline in share prices for the cosmetics sector is excessive compared to earnings and export trends. Although short-term supply and demand issues have led to steeper drops, the outlook is that a rebound is likely to center on stocks with solid earnings performance in the current rotational market environment.

According to NH Investment & Securities on June 3, research analyst Jeong Ji-yoon stated the previous day, "Since April, the gap between the market conditions and fundamentals of the cosmetics sector and its share prices has widened significantly."

"Exports at Record Levels... Accelerated Growth in Europe"

Currently, the 12-month forward price-to-earnings ratio (PER) for the cosmetics sector has dropped to 17.7 times. Compared to the peak of 22.6 times in April, this represents a significant reduction in valuation pressure.

Jeong noted, "The biggest factor behind this decline in share prices is supply and demand issues," adding, "During the upcoming rotational market, we expect a rebound focused on companies with robust earnings."

In fact, the cosmetics industry continues to post record-breaking export results. In May of this year, Korea's cosmetics exports reached $989.4 million, up 24% year-on-year. This figure is the second highest on record, following April. Notably, exports to Greater China (China and Hong Kong) grew by 8% year-on-year, while exports to regions outside Greater China increased by 29%, indicating that global market penetration is ongoing.

By country, expansion in the North American and European markets was particularly notable. In May, export growth rates were especially strong in the United States (32%) and Canada (35%) in North America, as well as Poland (132%), the United Kingdom (114%), and the Netherlands (161%) in Europe. In contrast, Japan (down 15%) and Thailand (down 5%) showed weaker performance.

"Possibility of a Rebound in Earnings Stocks During Rotation"

Jeong forecast that the global penetration of K-beauty will continue to rise. Starting in the second quarter, major countries will enter their online shopping seasons, and CJ Olive Young is scheduled to open stores in the United States. In addition, the expansion of Silicontwo's logistics center in Poland from the second quarter is expected to gradually boost both B2C (business-to-consumer) and B2B (business-to-business) sales for K-beauty in Europe.

Jeong maintained APR and Dalba Global as the top picks in the cosmetics sector. She stated, "MediCube, APR's beauty device brand, is expected to achieve over 400 billion won in direct sales in Europe within the next year," and noted, "Dalba Global is also seeing improved e-commerce sales momentum in North America and Europe compared to the previous quarter."

She added, "The three leading original design manufacturers (ODMs) in the sector also offer attractive valuations, as their share prices have declined despite upward revisions to their individual earnings guidance. This presents a buying opportunity at lower prices."

This content was produced with the assistance of AI translation services.