Cosmax’s China arm targets late-2022 Kosdaq listing

Cosmax East, which owns and manages Cosmax’s business in China in its entirety, has announced plans to seek listing on the Korea Stock Exchange. With the funding from the IPO, the company plans to embark on an organizational reshuffle to complete the transfer of management control. 

Cosmax East recently selected Daishin Securities Co., Ltd. and KB Securities Co., Ltd. to lead its Kosdaq listing plan for late next year.

Even though Cosmax East is headquartered in Korea’s Gyeonggi Province, it is the holding company of COSMAX’s China operations. The Chinese arm’s local production companies, Cosmax China, Inc. and Cosmax (Guangzhou) Cosmetics Co., Ltd., have the capacity to push out some 720 million products a year. That is the largest cosmetics production capacity in China.

Last year, revenue from the two subsidiaries in China jumped nearly twofold to 467.7 billion won ($394,460,518) from 252.9 billion won three years ago. This year’s sales in China are expected to hover around 620 billion won. That means the total sales volume in China could be equivalent to 70% of the figure in Korea. 

As the Chinese market has the potential for further growth, Cosmax East expects its value to exceed 1 trillion won. When it received investment from Seoul-based venture capital firm SV Investment in 2019, its value was 830 billion won.

Beijing updated its laws regarding cosmetics production for the first time in 30 years this year, enforcing tougher regulations on materials management, government authorization and advertising. The change weeded out smaller cosmetics makers, which worked in favor of the COSMAX group. 

But with COSMAX's market capitalization hovering around 1.15 trillion won, having both the parent company and its Chinese arm on the same exchange could be problematic. 

If Cosmax East succeeds with its KOSDAQ listing, SV Investment could rake in double the amount of its investment in the COSMAX group because it holds 10% of the shares as the financial investor. 

SV Investment has put in 82.8 billion won into the makeup and skincare company with the condition of it going public within four years. Under this condition, Cosmax East needs to finish the IPO process by 2023. 

There is also the view that the COSMAX group is trying to list the Chinese division to finish the transfer of management control. 

An industry insider told The Korea Economic Daily that when Cosmax East is listed, the COSMAX group will have a total of four listed companies. When the transfer of management control is finalized within the group, it can use the profit from the exchange listing to pay for inheritance taxes and more.

Write to Jun Ye-jin at seeker@hankyung.com
Jee Abbey Lee edited this article.