[THE INVESTOR] Cosmax’s third-quarter earnings have been disappointing, said Eugene Investment and Securities on Nov. 8 lowering the target price to 145,000 won (US$129.61) from 205,000 won.

Its operating profit in the period came in at 13.2 billion won in line with market consensus, but net profit widely missed expectations at 5.5 billion won. Revenue increased despite being a low season but increasing share of low-margin products undermined its profitability. Personnel costs in domestic operations grew while financial costs rose as it is expanding manufacturing facilities in Shanghai and Guangzhou, said analyst Lee Seon-hwa.

While the cosmetics industry is slowing down, ODM makers will be able to continue growing. However, aggressive investments and increasing costs may cause cash flow problems when interest rates rise, the analyst pointed out.

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