Warren Buffett Invests in Ulta Beauty - Positive Impact on CJ Corp?

• In this insight, we discuss how Warren Buffett's recent investment in Ulta Beauty is likely to have a positive impact on CJ Corp's valuation.

• CJ Olive Young (largest shareholder is CJ Corp) is the dominant health & beauty cosmetics chain in Korea. CJ Olive Young has a similar business model to Ulta Beauty.

• Our NAV analysis suggests an implied market cap of 4.7 trillion won or implied price of 160,977 won per share for CJ Corp, representing a 38% upside from current levels.

In this insight, we discuss the impact of Warren Buffett's recent investment in Ulta Beauty on the valuation of CJ Corp (001040 KS). While Warren Buffett sold nearly half of its holdings in Apple (AAPL US) in recent weeks, he acquired stakes in a few companies including Ulta Beauty (ULTA US) which is one of the leading cosmetics stores chain in the United States.

According to recent filings, Berkshire owned about 690,000 Ulta Beauty shares worth $266.3 million as of 30 June. After this news came out, Ulta Beauty shares jumped 14%. As of 3 February 2024, Ulta Beauty operated 1,385 stores across all 50 states in the United States. Ulta Beauty currently has a market cap of US$15.7 billion.

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CJ Olive Young is the Dominant Health & Beauty Cosmetics Chain in Korea

CJ Olive Young is the dominant health & beauty (H&B) cosmetics chain in Korea. CJ Olive Young has nearly 90% market share in the local health and beauty store chain sector in Korea. CJ Olive Young has a similar business model to Ulta Beauty in the US. CJ Olive Young had 1,338 stores in Korea at the end of 2023. CJ Olive Young has similar number of stores to Ulta Beauty in the US. The number of CJ Olive Young stores surged from 91 in 2010 to 1,259 in 2020. From 2020 to 2023, the number of CJ Olive Young H&B stores increased, albeit at a much slower rate than from 2010 to 2020.

Olive Young is a retail store that sells mostly cosmetics (including skin lotions, face masks, and shampoos) and health supplements, as well as snacks, beverages, and other food items. The company also has distribution networks in 150 countries around the world. In addition to the offline stores, Olive Young has a strong online presence.

In addition to the company's dominant market share in the local health & beauty offline retail segment, another big bright spot for the company is its rapidly expanding overseas online store called Olive Young Global. The company launched Olive Young Global in 2019 and this overseas business has gained a lot of popularity overseas. The company wants the Olive Young Global platform to become the export gateway for K-beauty products overseas.

CJ Olive Young had overseas sales of 110.8 billion won in 2023, up 48.9% YoY and global online mall (Olive Young Global) reached 1.2 million.

Olive Young Global website (Source: CJ Olive Young)