The author is an analyst for NH Investment & Securities. She can be reached at jiyoony@nhqv.com -- Ed.
C&C International’s 4Q23 results met consensus, if excluding incentive compensation. As of 1Q24, domestic and North America-focused orders are up 80% y-y. Backed by hit products from multiple indie brands and category expansion, C&C International is well-positioned for continued strong earnings.
2024 off to good start
In its 4Q23 earnings call, C&C International confirmed: 1) robust sales growth in target markets (Korea: +79% y-y, North America +71% y-y); 2) the launch of hit products from a number of indie brands in Korea; and 3) a continued broadening across categories and into new regions, from traditional lip products to liquid blush in North America.
Even more encouraging is the strong order intake in Korea and North America thus far in 1Q24. In January, orders received totaled 19mn units, up 80% y-y from 11mn units in Jan 2023. We forecast 2024 sales of W279.8bn (+27% y-y) and OP of W50.0bn (+56% y-y), foreseeing efficient utilization of the firm’s capacity.
4Q23 review: Completed successfully
C&C International recorded consolidated 4Q23 sales of W63.1bn (+64% y-y) and OP of W9.1bn (+95% y-y), with OP meeting consensus (W11.3bn), if excluding business performance-based incentives (W2.3bn).
The Korea subsidiary posted sales of W59.2bn (+74% y-y) and OP of W8.4bn (+293% y-y). Bolstered by an expansion of tint filling facilities at domestic plant #3 and stabilization of tint auto-filling and compression facilities at domestic plant #2, the subsidiary enjoyed a 14% q-q uptick in sales, displaying strong operating leverage even in the low season. In addition to the three existing major domestic clients (Clio, Rom&nd, and 3CE), Amuse, Lily by Red, and Too Cool for School in Korea and Rare Beauty and Tarte in North America are showing continued robust growth.
The Chinese subsidiary reported 4Q23 sales of W4.5bn (-6% y-y) and OP of W1.1bn (-35% y-y). Earnings improved q-q on deferred lip tint volume to 4Q23 from an existing client. We expect sales volatility to ease on the addition of six new local indie brand customers in China from 1Q24.