Summary
- Traditional Decline: Leading traditional cosmetic companies like Amorepacific (090430:KS) and LG Household & Health Care (051900:KS) face declining sales and profits.
- Duty-Free Sales Impact: Withdrawal of discount policies for Chinese wholesalers has led to significant sales drops in duty-free shops.
- Medical Beauty Rise: Companies like PharmaResearch (214450:KQ), Classys (214150:KQ), WonTech (336570:KQ), and Viol (335890:KQ) are gaining traction with products targeting hospitals rather than consumers.
- Export Growth: Medical laser devices show a 28.2% YoY increase in export value, highlighting the shift towards medical beauty.
Both Amorepacific and LG H&H, leading cosmetic companies in Korea, are facing sluggish performance despite the re-opening from the pandemic. The primary factors contributing to the decline in performance are poor results in the highly dependent Chinese market. Sales have also been declining in profitable domestic duty-free shops. In particular, major cosmetic companies have been hit hard as they face setbacks in their business due to the withdrawal of discount policies targeting Chinese wholesalers like “Daigous” by Korean duty-free operators.
In the first quarter of 2023, LG Household & Health recorded a mere 2.4% growth in revenue, while Amorepacific saw a decline of -21.6% compared to the same period last year. Profits also decreased significantly by 16.9% and 59.3%, respectively.
Shares also plummeted, with LG Household & Health experiencing a 34% decline and Amorepacific dropping by 28.9% year-to-date. According to Aicel’s Korea DFS tracker data, the combined sales of major Korean cosmetic companies in the second quarter of 2023 are estimated to decrease by 21.9% compared to the same period last year.
While traditional cosmetic companies struggle with poor performance, medical beauty companies like PharmaResearch, Classys, WonTech, and Viol are showing noticeable growth. These companies supply products and equipment not to the general consumers but to hospitals. PharmaResearch’s flagship product is the Rejuran filler, while Classys, WonTech, and Viol supply laser devices for skin treatments. These companies are particularly experiencing high growth, focusing on overseas exports. Aicel’s export tracking data indicates a 28.2% year-on-year growth in the export value of medical laser devices in the second quarter.
While traditional cosmetics companies heavily rely on brand power and consumer recognition, medical beauty companies emphasize the practical effectiveness of their products. Unlike cosmetics, which consumers cannot immediately experience the effects of, skin aesthetic procedures provide immediate results. These beauty medical companies are expanding their business into the general cosmetics sector, leveraging the recognition they have gained through dermatological procedures. Investors should closely monitor whether this trend will continue structurally throughout the year.
