Hyundai Bioland: A Key Player in Natural Cosmetics Ingredients

Hyundai Bioland, a leading manufacturer of cosmetics raw materials, supplies major domestic cosmetics brands. With the downstream industry rebounding, demand for raw materials is improving. Additionally, the inclusion of distribution sales for Nestle's health functional foods from this year is expected to boost sales by over 30% year-on-year.

Hyundai Bioland dominates the domestic natural cosmetics ingredients market with approximately 50% market share. Despite a decline in its operating profit margin (OPM) from a peak of 20% to below 10% since 2017 due to slowing growth and deteriorating earnings at a Chinese subsidiary, the company is poised to achieve sales of at least W130bn (+30% or more year-on-year) in 2024.

Strategic Partnership with Nestle to Drive Growth

The distribution of Nestle's health functional food is set to be a key growth driver this year. As Nestle expands its presence in Asia, Hyundai Bioland could become a primary production partner. Starting at W2.3bn in Q1 2024, Nestle-related sales are expected to grow to W6bn in Q2 2024, with annual sales projected to reach around W30bn.

In line with the rebound in the cosmetics industry, the cosmetics ingredient business has recorded positive year-on-year growth for three consecutive quarters. We forecast 2024 sales of W136.3bn (+34.1% year-on-year) and operating profit (OP) of W13.8bn (+95.3% year-on-year). Trading at a 2024 price-to-earnings (P/E) ratio in the low-10x range, Hyundai Bioland offers strong valuation appeal.