The share price of Beauty Community Public Company Limited (BEAUTY) rebounded from yesterday’s 7.63% plummet in a jump of ฿0.12/share or 5.50% to close the morning session on January 28, 2020, at ฿2.30/share.
KTB Securities (Thailand) (KTBST) states that the 1Q20E earnings would feel the pain from coronavirus from the suspension on in- and outbound of Chinese tour group by Chinese authorities due to the spread of coronavirus.
KTBST also states that it does not expect revenue from China market (traditional channel and eCommerce, as well as sales for Chinese tourists) in February in which would create the downside of 2.2% to KTBST’s 2020E net profit forecast. Revenue from China market accounts for 26% of BEAUTY’s 2020E total revenue and for 90% of overseas sales. Meanwhile, KTBST has forecasted BEAUTY’s 2020E revenue from China market to be Bt48mn/month, which would generate a net profit of Bt7mn/month.
In this regard, KTBST expects 1Q20E earnings to feel the pain from the spread of coronavirus, which thus far has damped consumer spending extensively and hinders logistics.
Thus, KTBST has given a “HOLD” rating and a target price of Bt2.70, which implies 2020E PER of 25x. BEAUTY’s share price has dropped dramatically 44% in six months, which KTBST believes already priced in its sluggish 2019E earnings outlook. As the spread of coronavirus has yet contained, as well as the pace of infection rate growth, the share price will likely come under such pressure.