Shares of APR (278470.KS), a global beauty company, plunged more than 20% in intraday trading as investor sentiment soured on expectations that third-quarter operating profit will fall short of market forecasts, even as revenue is projected to more than double from a year earlier.
APR traded at 281,000 won in the afternoon session on the 13th, down 71,000 won, or 20.17%, from the previous close, according to the Korea Exchange. The decline stood out even as the broader Korean market weakened, with the KOSPI falling more than 6% during the session.
Analysts pointed to lowered expectations for third-quarter earnings as the reason for the slide. Shinhan Securities (008670.KS), Hyundai Motor Securities (001500.KS) and Meritz Securities (008560.KS) all cut their price targets for APR on the same day, forecasting that third-quarter operating profit would miss market estimates.
Shinhan Securities estimated third-quarter revenue at 788.2 billion won and operating profit at 178.1 billion won. That represents a 104% increase in revenue and an 85% rise in operating profit from a year earlier. Still, the operating profit estimate is about 10% below the market consensus of 197.3 billion won.
Hyundai Motor Securities projected revenue of 780.1 billion won and operating profit of 169.3 billion won. Meritz Securities forecast revenue of 777 billion won and operating profit of 167.8 billion won. The three brokerages' average operating profit estimate of about 171.7 billion won is roughly 13% below the market consensus.
Rising costs from overseas expansion were cited as the main reason for the slowing profitability. Revenue is growing quickly in the United States and Europe, but logistics costs and sales commissions are increasing alongside it, analysts said. A stronger won also weighed on operating profit.
Shinhan Securities and Hyundai Motor Securities each lowered their price target for APR to 510,000 won. Meritz Securities cut its target to 520,000 won. All three brokerages maintained their buy ratings.
Analysts expect top-line growth to continue, led by overseas markets, despite near-term pressure on profitability. They are focusing on expanding sales in the United States and Europe and the potential for improved results from the year-end shopping season in the fourth quarter. For now, however, how effectively the company manages its rising costs relative to revenue growth is seen as the key to any rebound in the stock.
