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Cosmetics

Strong China sales lift Cosmax shares 20% in two months

Some 13 of the 25 best-selling cosmetics products during China’s 6.18 shopping festival were made by Cosmax

By Jul 13, 2021 (Gmt+09:00)

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Cosmax founder and Chairman Lee Kyung-soo in China
Cosmax founder and Chairman Lee Kyung-soo in China

Korea’s leading cosmetics manufacturer Cosmax Inc.’s share price is skyrocketing this year, thanks to the company's strong performance in China.

Shares of the world’s largest cosmetics original design manufacturer (ODM) started trading at 99,900 won ($87.30) on its first day of trading on Jan. 4, and had risen to 138,000 won ($120.59) by July 12. Analysts highlighted that Cosmax shares grew by 20.84% in just over two months, from May 3 to July 12.

An ODM company is one that designs and manufactures a product, as specified, which is eventually rebranded by another firm for sale in the market. Cosmax’s global clients include the L'Oréal Group, Unilever plc and Johnson & Johnson.

The company’s share price has been rising in accordance with the rise in consensus earnings estimates among analysts. Three months ago, the analysts estimated its second-quarter operating profit to be 26.7 billion won ($23.3 million). But the estimated figures were lifted to 31.1 billion won ($27.2 million) as of July 11.

Cosmax China’s Shanghai Plant 2 specializes in the production of color cosmetic products.
Cosmax China’s Shanghai Plant 2 specializes in the production of color cosmetic products.

The change in estimates largely came from a surprise performance in China during Alibaba Group’s 6.18 Mid-Year Shopping Festival, one of the two largest shopping festivals in the country held on June 18.

Following reports that 13 out of the 25 best-selling cosmetics products during the 6.18 festival were manufactured by Cosmax, South Korea’s KB Securities Co. raised the company’s share price target by 17% to 175,000 won ($152.95) on July 11.

KB Securities estimated Cosmax’s second-quarter operating profit in China to be 17.7 billion won ($15.5 million), up 38% from the same period last year, on revenue of 173.8 billion won ($151.9 million).  

“Despite their recent spike, Cosmax’s shares have more room to grow fueled by strong performance in China,” said KB Securities Analyst Park Shin-ae.

Another domestic securities firm Meritz Securities Co. said Cosmax is “the most recommended stock to buy” among the shares of publicly listed cosmetics firms in Korea.  

“Not only do Chinese consumers still prefer Korea’s color cosmetics products, Cosmax has also kept expanding its client pool in the country,” said Meritz Securities analyst Ha Nu-ri. 

Write to Sung-mi Shim at smshim@hankyung.com

Daniel Cho edited this article.

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