Amore grows even bigger

Amorepacific may soon position itself as the fifth biggest share on the main stock market, outpacing a big-name Hyundai affiliate as the company’s shares ride higher on its smart products and the prospect of exponential growth in Asian markets.

As of Monday’s close, Amorepacific was the 6th largest share on the main Kospi, with a market cap of 22.8 trillion won. This places it neck in neck with Hyundai Mobis, the auto parts affiliate of Hyundai Motor Group with a market cap of 23.5 trillion won, Korea Exchange data showed.

Shares in Amorepacific, Korea’s No.1 cosmetics maker, have been on an enduring rally this year, jumping 76 percent so far. This compares with a 12 percent rise in the broader Kospi market and a 43 percent gain seen by rival firm LG Household & Health Care.

Analysts say Amorepacific’s shares are far from running out of steam.

Daewoo KDB Securities said on Monday that Amorepacific shares will hit as high as 5.4 million won in the next 12 months, up 38 percent from Monday’s closing price and 74 percent from its previous target of 3.1 million won. Nomura Securities has also recently upped its target price on the company to 5 million won.

Daewoo KDB forecast the company’s first quarter operating profit would rise 44 percent year-on-year to 252.3 billion won on sales of 1.3 trillion won.

“Amorepacific has shown itself capable of creating new global market trends with a strong pipeline of new products,” said Hahm Seung-hee, an analyst at KDB Securities, adding that the Korean company “has done a better job than bigger name global brands in some areas,” referring to its hot-selling air cushion compacts.

Since its debut in 2008, Amorepcific’s compacts - which combine coverage, SPF protection and moisturizers into a single product - have become hugely popular.

In 2014 alone, 26 million of the air cushion products were sold both internationally and domestically. Its sales more than quadrupled from 2012 when it sold 5.5 million units, according to Amorepacific.

Amorepacific products are particularly well received in China, where there’s much more room for growth in per-capita spending on cosmetics than other countries in the region.

According to Hahm, the average annual spending on cosmetics per person in developed countries ranges $240 to $300, with spending by Asian consumers in Japan near the higher-end.

The average spending on cosmetics in China is still $35, thus the higher upside potential as its purchasing power grows in line with its GDP. The strong inflow of Chinese tourists into Korea will also support growth, according to Nomura Securities.

Amorepacific shares may look expensive with its price-to-earnings multiple well above 40, compared with the broader market Kospi’s around 10. Analysts say the company’s shares are in the process of a re-grade as its earnings grow stronger and faster than previously anticipated.

“Amorepacific is currently undergoing a huge transition from a local player to a global one. Its numbers and valuations are likewise moving upwards,” said Na Eun-chae, an analyst at Korea Investment & Securities.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]