The cosmetics company KOSE Corporation (4922: JP) (OTC: KSRYY) saw a downgrade in its stock rating from "Hold" to "Underperform" by Jefferies, which also revised the price target for KOSE Corporation to ¥7,500 from the previous ¥10,000.
The adjustment reflects a more cautious outlook on the company's financial performance in the coming years.
The research firm has reduced its operating profit (OP) estimates for KOSE Corporation to ¥20.1 billion for the fiscal year ending December 2024, compared to the earlier estimate of ¥25.0 billion and the consensus of ¥24.8 billion.
For the fiscal year ending December 2025, the OP estimate is set at ¥24.7 billion. These figures suggest that while the firm expects KOSE's consolidated sales to recover to pre-pandemic levels by the fiscal year 2024, it only foresees a modest improvement in overall profit margins.
The firm predicts that the Tarte and cosmetaries segment of KOSE Corporation will see significantly higher profits. However, the anticipated overall margin is projected to be around 6%. The outlook suggests a tempered expectation for the company's profitability in the near term.
The research firm also expressed skepticism regarding KOSE Corporation's ability to achieve a 16% operating profit margin (OPM) from the fiscal year 2025 onwards.
KOSE Corporation has been under scrutiny as Jefferies downgraded the company's stock from Buy to Hold. The firm also adjusted the price target downwards to JPY7,500 from the previous JPY10,000.
The action came after Jefferies revised its operating profit estimates for KOSE to JPY20.1 billion for the fiscal year ending December 2024, a decrease from the previous estimate of JPY25.0 billion.
The firm's revised estimates are based on the anticipation that KOSE's consolidated sales will recover to pre-pandemic levels by 2024. Significant profit improvements are expected in the Tarte and cosmetaries segments, although the profit margin is projected to hover around 6%.
InvestingPro Insights
In light of the recent downgrade of KOSE Corporation's stock rating, InvestingPro data and tips provide a more nuanced view of the company's financial health. With a market capitalization of $3.42 billion and a high gross profit margin of nearly 70% as of the last twelve months ending Q2 2024, KOSE Corporation demonstrates a strong ability to generate earnings relative to its revenue. Despite the cautious outlook from the research firm, KOSE Corporation holds more cash than debt, indicating financial stability and the capacity to weather potential downturns.
InvestingPro Tips suggest that KOSE Corporation is a prominent player in the Personal Care Products industry and has maintained dividend payments for an impressive 25 consecutive years. Additionally, the company's liquid assets exceed its short-term obligations, providing further evidence of its solid financial footing. With a price-to-earnings (P/E) ratio of 33.44, the company is trading at a high earnings multiple, which could reflect investor confidence in its future growth prospects or a market premium for its industry leadership.
For investors seeking a deeper analysis, there are 9 additional InvestingPro Tips available, offering insights that could inform investment decisions. While recent price performance shows a significant drop over the last three months, KOSE Corporation's fundamentals, such as its ability to sufficiently cover interest payments with cash flows and its profitability over the last twelve months, could provide a counterbalance to the concerns raised by the research firm's downgrade.
Overall, the InvestingPro data and tips offer a perspective that, while acknowledging the challenges faced by KOSE Corporation, also highlights the company's enduring strengths. Investors may find this information valuable when considering the long-term potential of KOSE Corporation in their portfolios.
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