BULLINK Investment Portfolio Update: Embracing the Seasonal Upsurge
Spotlight on 1Q25 Earnings: Triumph in Korea, China, and the US
Kolmar Korea recently dazzled the market with its astonishing 1Q25 performance, revealing revenues of KRW 653.1 billion, marking a remarkable 14% YoY growth. The company also witnessed an extraordinary 85% YoY increase in operating profit, reaching KRW 59.9 billion. This robust performance underscores Kolmar Korea's strategic prowess across key markets, namely Korea, China, and the US.
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Korea: Fueling the Growth Engine
Korea spearheaded the company's growth with domestic sales hitting KRW 274.3 billion, an 11% increase YoY. Notably, the sun care indie brands have outmatched the industry growth, emerging as key performers while legacy brands decline. Entering Q2's peak sun care season, we anticipate further upticks in order volumes. The shift towards an improved sun care and Hero SKU mix catapulted the operating margin to 12.4%, setting a new Q1 benchmark.
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China: A Promising Rebound
After a period of underperformance, China's market showed promising signs of recovery with sales at KRW 41.6 billion, a 20% increase YoY. The operating profit also soared by 72%, reaching KRW 3.1 billion with a 7.5% OPM. This resurgence is largely attributed to increased sun care orders, rebounding from last year's negotiation-induced slump. This growth trajectory is expected to hold steady.
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The US: Riding the Crest of Expansion
The US market recorded a spectacular YoY sales growth of 210%, reaching 21.7 billion won, with operating profits turning positive to 1.5 billion won. This marks a QoQ increase of 300 million won and an OPM of 6.9%. The surge in orders from pivotal customers, alongside the onboarding of new base makeup clients, underscores sustained profitability and positions the US operations for continued success.
Earnings and Valuation: A Compelling Proposition
Kolmar Korea's stock is buoyed by the dual momentum from its thriving sun care sector and US market activities. Sun care operations are poised for an unprecedented order spree this peak season, suggesting record domestic margins come Q2. Meanwhile, in the US, the imminent completion of a second plant in June heralds additional growth, backed by confirmed clients and potential new brands seeking onshore production post-tariff changes.
In light of these developments, we have revised the 25-year US revenue forecast upwards, from KRW 80 billion to KRW 90 billion. Consequently, we are elevating our price target from KRW 92,000 to KRW 110,000, factoring in enhanced estimates (25F domestic OPM of 12.5%) and amplified valuations (reflecting industry multiples).
The stock is currently valued at 14x 12FM PER, presenting a reasonably priced investment opportunity. Our recommendation remains a strong buy.
This report exemplifies the potent combination of strategic market maneuvers and sound operational execution, underscoring Kolmar Korea's trajectory towards sustained growth and value creation for investors in 2025 and beyond.
