Yuanta Securities Korea analyzed on the 24th that Cosmecca Korea would experience significant stock price volatility due to uncertainty in the performance recovery of Englewood Lab, a U.S. corporation. They adjusted the target stock price down from the existing 80,000 won to 65,000 won while maintaining the investment opinion of 'buy.' The closing price for Cosmecca Korea on the previous trading day was 47,300 won.
In the fourth quarter of last year, Cosmecca Korea's revenue amounted to 128.3 billion won, a 5% increase compared to the previous year, while operating profit recorded at 13.3 billion won, a decrease of 11% from the previous year. Operating profit fell 30% below the market expectation of 19 billion won.
The reasons for the poor performance included losses from Englewood Lab's U.S. and China subsidiaries, rising cost rates due to changes in product mix, and increased selling and administrative expenses. Research Institute Lee Seung-eun noted, 'The New Jersey subsidiary recorded losses due to decreased sales and labor cost burdens, while the China subsidiary faced increased costs due to low-cost product production,' adding, 'Moreover, the increase in the proportion of cushion products and rising selling and administrative expenses dampened the operating profit margin.'
Cosmecca Korea also presented conservative earnings forecasts for this year, expecting a revenue growth rate of 14-15% on a consolidated basis and an operating profit margin around 12%. In terms of operating profit margins, the Korean subsidiary and Englewood Lab are expected to grow by 13.5% and 11.7%, respectively, while the China subsidiary aims to reach breakeven point (BEP).
This research institute further mentioned, 'In the second half of last year, the U.S. Food and Drug Administration (FDA) inspected the company's over-the-counter (OTC) production facility, and both the positive plant and Englewood Lab's Incheon plant passed inspection,' adding, 'From March of this year, the Cheongju hydrogel production line is set to commence, securing new revenue sources.'
Englewood Lab's equity is expected to expand to 55%, including the shares of related parties, strengthening responsible management and improving long-term performance expectations. This research institute stated, 'If the won-to-U.S. dollar exchange rate rises, there is a possibility of improved profitability due to increased foreign currency translation profits, but in the short term, due to Englewood Lab's sales decline and labor cost burdens, a reverse earnings trend is anticipated for the first quarter of this year.'
He added, 'The stock price is volatile due to the uncertainty in Englewood Lab's performance recovery, but as there are factors for long-term profitability improvement, it is expected to show a gradual upward trend after some short-term adjustments.'