BULLINK Portfolio Report: Earnings Surprises Await for Peak Season
1Q25 Review: Outperformers in Korea, China, and the US
Kolmar Korea's Unexpected Momentum
Kolmar Korea has delivered an impressive 1Q25 performance, defying market expectations with a revenue surge to KRW 653.1 billion, marking a robust 14% increase year-over-year (YoY). The operating profit similarly ascended, reaching KRW 59.9 billion, an 85% YoY rise. This remarkable growth was fueled by the company's strategic operating leverage across significant regions: Korea, China, and the US.
Domestic Market Dynamics
In Korea, Kolmar witnessed a striking performance, clocking domestic sales at KRW 274.3 billion, up by 11% YoY. This surge was largely driven by the thriving sun care indie brands, which are currently outperforming legacy brands. As the sun care segment enters its peak season, orders have shown a promising uptick, suggesting that the top-line growth trajectory will continue to strengthen. With improved sun care and Hero SKU mix, Kolmar achieved a record Q1 operating margin of 12.4%.
Revitalization in China
China, historically an underperforming segment, posted unexpectedly robust results with sales climbing to KRW 41.6 billion, a 20% YoY increase accompanied by a substantial 72% YoY rise in operating profit. This positive turnaround was facilitated by the resolution of prior unit price negotiations, leading to an expansion in sun care orders.
US Expansion and Profitability
The US operations reflected a remarkable trend, with sales surging by 210% YoY to 21.7 billion won and a notable positive shift in operating profit. Continued strong orders from key customers, alongside new product launches and base makeup customer acquisitions, have set the stage for sustained profitability improvements.
Valuation and Earnings Outlook
Kolmar Korea's stock momentum is primarily driven by the robust sun care demand and strategic valuation in the US market. The strong order book underlines a promising peak season ahead, with expected record domestic margins in Q2. In the US, anticipation builds around the completion of a second plant in June, expected to further bolster revenue streams with new brand partnerships for onshore production, post-tariff policy adjustments.
Reflecting these developments, Kolmar Korea has revised its US revenue guidance for 2025 upwards to KRW 90 billion from a previous estimate of KRW 80 billion. Consequently, we have adjusted our price target to KRW 110,000 from KRW 92,000, considering stronger earnings estimates and improved industry multiples. The stock's current trading at 14x 12FM PER remains a compelling investment proposition. Our recommendation remains a confident 'Buy.'
Note: The data and expectations presented are based on forecasts and market analysis as of 1Q25. The investor should consider potential market fluctuations and economic factors.
