SK ie, Amorepacific stocks diverge after releasing Q1 results

[Courtesy of SK ie technology Co.]

SK ie technology Co. shares underperformed on Tuesday after the company announced an operating loss for the first quarter of 2024.

The shares were trading at 60,400 won ($43.87) as of 9:15 a.m., down 5.03 percent from the previous day‘s close. SK ie technology announced after Monday’s market close that it posted an operating loss of 67.4 billion won in the first quarter of the year, turning into a deficit from its operating profit of 1.7 billion won that it recorded during the same period in 2023.

Daol Investment & Securities Co. downgraded its investment opinion on the company to “hold” from “buy” on Tuesday, citing the deteriorated first-quarter performance, while also lowering its target price to 71,000 won from 91,000 won.

Commenting on the company‘s “earnings shock” in the first quarter, Daol Investment & Securities Co. analyst Jeon Hye-young said that inventory pressure after a significant increase in sales volume in the fourth quarter of 2023 due to long-term supply contracts with the company’s captive customers led to a decline in sales.

“Shipment volume is also expected to decline by 28 percent year-on-year in the second quarter of 2024,” Jeon said, adding an “expected delay in the operation of the Poland plant due to sluggish forward demand in 2024” is another negative factor. Jeon predicted that the company would post an operating loss of 90 billion won in 2025 to deviate from the previous estimate for an operating profit of 44 billion won.

Meanwhile, Amorepacific saw a sharp increase in its stock prices on the same day, driven by a first-quarter performance that exceeded market expectations.

Amorepacific stocks traded at 166,600 won as of 9:08 a.m., up 6.86 percent from the previous trading day. They hit a 52-week high of 170,000 won immediately after the opening.

On Monday, Amorepacific announced that its first-quarter sales decreased by 0.2 percent year-on-year to 911.5 billion won, and operating profit increased by 12.9 percent to 72.7 billion won, significantly exceeding the operating profit consensus at 50.9 billion won.

Korea Investment & Securities Co.’s Kim Myung-jo said the cosmetics company saw a significant wholesale sales increase with the launch of new Laneige products in the United States, which led to its overseas subsidiaries posting an operating profit of 31.6 billion won. Kim cited the growing popularity of Korean cosmetics in Indonesia and Malaysia as new opportunities for the company as well.

The deficit in the Chinese subsidiary was smaller than expected “thanks to a recovering demand for cosmetics among Chinese consumers, leading to a decrease in promotional expenses for Amorepacific in the country” according to Kim. He also predicted that demand would continue to recover due to the reduction of cosmetics inventory held by Chinese consumers.