Meritz Securities said on March 23 that Amore G’s subsidiaries Innisfree and Etude House have a higher level of uncertainty about their business in China. Meritz, accordingly, downgraded its investment rating on Amore G from buy to trading buy, while cutting the target price from 150,000 won to 140,000 won.
Yang Ji-hye, analyst at Meritz, said, “The number of Chinese tourists started declining sharply from mid-March. It would inevitably deal a blow against the performance of Innisfree and Etude House.”
The duty-free channels account for about 20 percent in AmorePacific's total sales. Yang said, “Although the cosmetic brands have established a strong foothold within the domestic brand shop channel market, chances are high that their growth would slow down this year primarily due to rising uncertainties over China-related duty-free channels and exports.”
She added that starting from the second quarter of this year, the damage on the brands' duty-free channels would be more visible. Their performance for the first quarter of this year which was relatively less impacted by the decline in the number of Chinese tourists would likely be in line with the market consensus.