Korean cosmetics stocks soar on FDA-approved sunscreen

(123rf)

Shares of Korean cosmetics firms that produce sunscreen products and materials approved by the United States health regulator soared in May, coupled with returning investor sentiment in the K-beauty industry, according to industry sources, Thursday.

"Recently, there were dramatic increases in the stock prices of Korean cosmetic firms that make sun protection products with US Food and Drug Administration approvals, as the US government is expected to soon impose stricter rules on sunscreen products sold in the US," an official from a local cosmetics firm said.

The US government plans to implement new guidance for the industry, launch new systems for submission of information and enforce new requirements that are part of the Modernization of Cosmetics Regulation Act of 2022, which overhauls the FDA framework for the regulation of cosmetics.

"Korean companies' exports of sunscreen products to the US could be damaged if they do not meet the FDA requirements,” the official added. "The companies that have already satisfied the FDA requirements seem to have attracted relatively more investments as their sales are expected to remain unharmed."

According to a report from market intelligence firm FnGuide, the stock price of Sunjin Beauty Science jumped some 112 percent in May.

Established in 1988, Sunjin Beauty Science produces raw materials for sunscreen products, which accounted for 43 percent of the firm's total sales in the first quarter this year. Their raw materials have reportedly been approved by the US Food and Drug Administration.

The stock prices of Englewood Lab, a company that produces sunscreen products mainly for the US sun protection market, and its mother company Cosmecca Korea, also soared by some 70 percent in the same month.

The stock price of Kolmar Korea, a local original development manufacturing company that exports FDA-approved sunscreen products, also increased by 30 percent in May, continuing its upward trend this year.

Industry sources also noted that the recent increases in local sunscreen product makers’ stock prices are coupled with the recovering investor sentiment towards the K-beauty industry.

“Even until last year, the overall investor sentiment towards Korean cosmetics firms was not so positive as Korea’s major cosmetics firms, like Amorepacific and LG Household & Healthcare, continued to struggle, mainly due to low exports to China. But, as Korean cosmetics firms are trying to diversify their export destinations, their performance started to improve, and the investor sentiment seems to have significantly recovered, affecting the overall beauty industry,” the official added.

According to the Korea Customs Service, South Korea’s exports of cosmetics increased by 21.7 percent to some $2.3 billion in the first quarter this year, marking the highest number for any January-March period.

China remained Korea’s top cosmetic exports destination, accounting for 26.6 percent of Korea's total cosmetics exports. But Korea’s cosmetic exports reliance on China has significantly decreased from 2021, when China’s share reached 53 percent.

On the other hand, Korea’s exports of cosmetics to the US and Japan increased 58.7 percent and 18 percent on-year, respectively, compared to the first quarter of last year. Korean exports of cosmetics reached all-time highs in 175 countries in the same period.

“The global interest in Korean sun protection products has also increased, especially in overseas countries like Japan and the US,” an official from a Korea's leading cosmetics firm said. “The recent success of Korea’s indie sunscreen brands on international online shopping platforms also played an important role.”

The ongoing success of Korean sunscreen products in overseas countries, however, could be hit by the scheduled implementation of the Modernization of Cosmetics Regulation Act, industry sources also warned.

“Not all companies will be able to meet the FDA requirements for sunscreen products, which are sold as over-the-counter drugs,” another source from the local beauty industry said.

A researcher from a local securities firm noted those sunscreen makers that cannot meet FDA requirements are at risk of losing share in the US sun protection market, and their stock prices could also be influenced by that.

As of 2023, the US accounts for almost 20 percent of the global sun protection market, which is estimated at over $11 billion, according to multiple market data sources.

By Shim Woo-hyun(ws@heraldcorp.com)