[Click e-Stock] Hugel Faces Short-Term Performance Challenge but Mid- to Long-Term Growth Expected...Target Price Lowered

Eugene Investment & Securities announced on the 21st that it has lowered its target price for Hugel from 420,000 won to 370,000 won, reflecting short-term performance pressures resulting from the transition to a direct sales structure in the United States. However, the brokerage maintained its "BUY" recommendation, citing the company’s mid- to long-term growth potential.

Da-bin Lee, a researcher at Eugene Investment & Securities, commented, "The sales gap caused by the transition to a direct sales system in the United States, along with cost executions that occurred earlier than anticipated, are expected to weigh on short-term earnings and the share price. Nevertheless, it is positive that Hugel has secured customer data and obtained early control over pricing and marketing, laying the foundation for directly managing its U.S. operations."

Hugel plans to convert its existing distribution agreement with its partner Beneb into a contract sales organization (CSO) agreement, with the aim of fully transitioning to a direct sales model in the U.S. by 2027. Lee explained, "Although the 2026 performance guidance was revised downward due to increased operational control—with sales growth revised to the high teens in percentage terms and the operating margin to the mid-30% range—the target of achieving 900 billion won in sales by 2028 and having over 30% of revenue generated from the U.S. market was maintained."

Regarding its strategy for the U.S. market, Lee stated, "Hugel is prioritizing clinics and medspas that operate multiple locations. Within 11 weeks of launching direct sales, the company succeeded in securing more than 30% of its main target customers as potential clients and converted over 50% of these into actual buyers."

On the third quarter results, Lee predicted, "Revenue is expected to grow 4% year-on-year to 110.1 billion won, while operating profit will decline 35% to 30.7 billion won, falling short of the operating profit consensus. Although the costs of repurchasing inventory and securing intangible assets (customer data) from the CSO transition weighed on profitability, strong growth in both the China toxin business and the cosmetics segment is expected to continue."

Lee further added, "Until 2027, it is appropriate to evaluate the company principally based on the acquisition of direct sales customers in the U.S. and the expansion of initial reorder rates, rather than profitability. From 2027, once the results of the direct sales initiative are reflected in revenue growth, a full-scale rise in the share price is anticipated."

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