Amorepacific Shares Plunge 25% Amid Disappointing Q2 Results

Amorepacific, a leading player in the Korean beauty industry, saw its stock plummet nearly 25% following the announcement of its second-quarter earnings, which fell significantly short of market expectations. This decline also resulted in a market capitalization loss of approximately 2.4 trillion KRW (about $2 billion USD).

On the trading day following the earnings release, Amorepacific's shares closed down 24.91% at 124,500 KRW, hitting an intraday low of 123,200 KRW. The company’s market capitalization dropped from 9.7 trillion KRW to 7.3 trillion KRW.

The decline was notably driven by heavy selling from foreign and institutional investors, who sold off 56.7 billion KRW and 140.5 billion KRW worth of shares, respectively. Amorepacific’s preferred stock also saw a significant decline, closing 21.37% lower at 36,600 KRW.

The main culprit behind this dramatic drop in stock price is Amorepacific’s weak financial performance in Q2. The company reported sales of 904.8 billion KRW and an operating profit of 4.2 billion KRW, marking year-over-year declines of 4.3% and 29.5%, respectively.

In response to these results, Korea Investment & Securities lowered its target price for Amorepacific from 240,000 KRW to 200,000 KRW, a 16.7% decrease. Analyst Kim Myung-ju cited underperformance in the Chinese market and disappointing results from subsidiary COSRX as key factors. COSRX’s sales fell slightly to around 143 billion KRW, with operating profit also declining compared to the previous quarter.

Kim explained that a fundamental overhaul of the sales strategy in China led to a significant drop in revenue. Additionally, duty-free sales fell by 25% year-over-year, further impacting the profitability of Amorepacific's domestic operations.

Hyundai Motor Securities analyst Ha Hee-ji also lowered the target price for Amorepacific from 230,000 KRW to 210,000 KRW, forecasting continued challenges through Q3 due to the restructuring of the Chinese subsidiary and weak duty-free sales. Other major securities firms such as Mirae Asset Securities, NH Investment & Securities, Kiwoom Securities, Hana Securities, and Shinhan Investment Corporation also reduced their target prices for the company.

While the recent decline in Amorepacific’s stock price is likely to be short-term, the company’s future performance hinges on the recovery of its Chinese business and improvement in COSRX’s results. The potential for a rebound exists, but it will require strategic adjustments and market recovery in key regions.

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