[Weekend Money] "'Here' Is Where the Future of K-Beauty Lies... Which Stocks Should Investors Watch?"

The K-beauty industry, which has continued to grow in global markets, is moving beyond simply expanding overseas distribution networks and viral marketing toward a business model centered on “dermocosmetics,” based on skin science and offering higher profitability and functionality. Analysts say that, amid rising costs of entering overseas markets and higher logistics expenses, companies that demonstrate actual profit growth rather than simply increasing sales will drive stock performance differentiation in the cosmetics sector in 2027.

In a report titled “The Future of K-Beauty Through Skin Science,” Cho Kyungjin, a researcher at IBK Investment & Securities, said, “In 2027, the standard for investment decisions in the cosmetics sector will be whether top-line growth translates into actual profit growth, rather than the export growth rate itself.” Cho added, “Going forward, companies that build product expertise and brand competitiveness in dermocosmetics and generate stable repeat demand are expected to secure differentiated growth opportunities in global markets.”

Dermocosmetics is a term combining dermatology and cosmetics. It refers to cosmetics developed to improve skin conditions based on recommendations from dermatologists and pharmacists, as well as clinical evidence. While conventional cosmetics focus on general skin care, such as moisturizing and beauty, dermocosmetics emphasize addressing specific skin concerns, including strengthening the skin barrier and caring for sensitive or acne-prone skin. They are also used for skin care after dermatological procedures or as an adjunct to the treatment of skin conditions.

South Korea’s cosmetics exports have continued to grow rapidly, driven by strong year-end shopping seasons and the expansion of offline distribution networks in the Americas and Europe. IBK Investment & Securities forecast that annual cosmetics exports would rise 31.6% from the previous year to approximately $12.4 billion in 2026, and increase 15.0% to $14.3 billion in 2027, setting a new record.

However, profitability gaps between companies are widening as initial store-entry fees, logistics costs, and marketing expenses rise with the expansion of overseas offline distribution channels.

“In 2027, it will be essential not only to benefit from opening new stores, but also to increase sales at existing stores, expand SKUs (the number of product types), and secure repeat orders,” Cho said. “Companies that introduce differentiated, high-functionality ingredients such as polydeoxyribonucleotide (PDRN), peptides, and exosomes into their skin-care products, and expand into adjacent categories such as slow aging and scalp and hair care, will demonstrate their capacity for profit growth.”

Demand is growing in the global cosmetics market for products that emphasize functionality and expertise in skin care. Cho cited the Dermatological Beauty division of L'Oreal, the world's leading beauty company, as a representative example. The division's sales in the first half of 2026 rose 10.6% from the same period a year earlier, significantly exceeding the group's overall growth rate of 6.5%. Its operating margin was particularly high, reaching 28.4%, above that of other divisions. This resulted from the strong sales and profitability of major dermocosmetics brands, including La Roche-Posay, CeraVe, and SkinCeuticals, each of which has grown to generate more than $1 billion in annual sales. “L'Oreal's example shows that dermocosmetics can become a key growth driver for cosmetics companies,” Cho said. “Korean cosmetics companies, too, can expect both top-line growth and improved profitability if sales of their dermocosmetics products increase as a share of total sales and they build product competitiveness.”

In global markets, including Europe, pharmacies and dermatology clinics have become major sales channels for dermocosmetics. In South Korea, specialized retail channels such as “pharmacy beauty,” which combines pharmacist consultations on site with functional products, are also emerging as a new growth driver.

IBK Investment & Securities named APR, Amorepacific, and d'Alba Global as promising investment picks, citing their dermocosmetics competitiveness, overseas growth potential, and visibility of profit growth.

APR is expected to increase its global market share by expanding Medicube's high-functionality skin-care products based on PDRN and peptides, while growing its offline distribution networks in the United States and Europe. Amorepacific has a portfolio of brands specializing in functional skin care, including Aestura, Illiyoon, and COSRX, and is expected to benefit from growth in the global dermocosmetics market. d'Alba Global is expected to strengthen the competitiveness of high-functionality products under its existing d'Alba brand and expand its product portfolio with the launch of a new dermocosmetics brand in 2027.

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