French cosmetic giant L’Oreal S.A. (FR:OR) is committed to increasing its investment in China despite the enhanced regulations for ingredient disclosures. The Chinese regulatory authorities have enforced increased disclosures from cosmetic companies, which could result in the divulging of trade secrets. However, L’Oreal is fully focused on serving the growing middle-class population in the world’s most populated country to boost its cosmetics sales.
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Paris-based L’Oreal is the world’s largest beauty company offering skincare, makeup, haircare, and fragrance products. Some of its renowned brands, including Lancôme, Yves Saint Laurent, Maybelline, Kiehl’s, L’Oréal Paris, Garnier, and Armani, are available globally in retail, drug stores, hair salons, and branded stores. OR shares have gained 22% in the past year.
China’s Enhanced Disclosure Requirements
In 2023, China imposed higher disclosure requirements for cosmetic companies citing product safety. These include detailing the ingredients, manufacturing process, raw material sourcing, and formula composition. The European Union (EU) objected to the requirements, claiming that the companies’ trade secrets could be revealed due to such regulations. Also, the EU was worried that the information collected could be misused, although no such reports have been established on the same yet.
Despite these odds, L’Oreal remains optimistic about the demand momentum in China, as CEO Nicolas Hieronimus mentioned in an interview at the CES consumer technology trade show in Las Vegas. Hieronimus confirmed that the company will increase its investment in the Chinese market. Plus, he is confident that the enhanced disclosures will not hurt L’Oreal’s trade secrets or formulations.
What is the Price Target of L’Oreal Stock?
Yesterday, Deutsche Bank analyst Tom Sykes reiterated a Sell rating on OR stock with a price target of €350, implying 20.5% downside potential from current levels.
Overall, OR stock has a Hold consensus rating on TipRanks. This is based on six Buys, three Holds, and three Sell ratings received during the past three months. The L’Oreal S.A. share price forecast of €385.95 implies 12.4% downside potential from current levels.
