1. Silicon Two Q2 Earnings: Analyzing the Earnings Shock

Silicon Two’s Q2 2025 provisional earnings reported sales of KRW 265.3 billion (-2% compared to expectations), operating profit of KRW 52.2 billion (-9% compared to expectations), and net profit of KRW 35.6 billion (-19% compared to expectations). While sales met expectations, the significant decline in profitability indicators is a key concern.

2. Reasons for Underperformance: Exploring the Declining Profitability

The decline in profitability is attributed to the underperformance of the PA business and potential unexpected costs. While the slowdown in the PA business due to the global economic downturn was anticipated, the extent of the decline was greater than expected.

3. Fundamental Analysis: K-Beauty Growth and Platform Competitiveness

  • Positive Factors: The continuous growth of the K-Beauty market and the competitiveness of the Stylekorean.com platform remain Silicon Two’s strengths. The steady growth of the CA business is also a positive sign.
  • Negative Factors: The underperformance of the PA business, increased exchange rate volatility, and risks associated with investments in new businesses are key challenges for Silicon Two.

4. Investment Strategy: Conservative Observation and Re-evaluation

We maintain a HOLD (conservative observation) recommendation in the short term. After the Q3 earnings announcement, it is necessary to re-evaluate the investment opinion by reviewing the recovery of the PA business, exchange rate trends, and the performance of new businesses.

5. Investor Action Plan: Observation and Information Gathering

Investors should monitor future earnings announcements and changes in business strategies and make careful investment decisions. In particular, they should closely examine whether the PA business sector’s performance improves and the growth potential of new businesses.