[THE INVESTOR] Amorepacific’s sales have slowed down both at home and abroad, missing market expectations in the first quarter, said Shinhan Financial Investment on April 24.

The securities firm downgraded its rating to a “trading buy” from a “buy” and lowered the target price to 310,000 won (US$273.85) from 370,000 won. 

The decline in Chinese inbound tourism has slowed down duty-free sales that largely accounts for domestic revenue, especially since mid-March, said analyst Park Sang-yeon estimating that its 2017 revenue will inch up 2.4 percent to 5.8 trillion won and operating profit will fall 6 percent to 797 billion won. 

As Hera and Iope’s key product “cushion” is losing its competitive edge, the beauty giant will falter not only in the duty-free sector but across domestic channels, and in China, according to the analyst. 

Park also lowered the target price for the holding company Amorepacific Group to 140,000 won from 150,000 won and its rating to a “neutral” from a “buy.” 

Daishin Securities was more optimistic and maintained a “buy” recommendation and 356,000 won target price saying that its Chinese operations will recover.

Growth in domestic market is weak but earnings from China is already picking up from this month after a slight dip in March, pointed out analyst Park Eun-jeong. Although the drop in Chinese visitors remains a matter of concern, investors should also pay attention to the progress in China, said the analyst. 

Amorepacific’s mid-price brands such as Laneige and Mamonde are growing steadily and there is a possibility that the THAAD row could be resolved, added Park. 

By Hwang You-mee (glamazon@heraldcorp.com)