BULLINK Portfolio Article: Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea has outperformed market expectations with its robust 1Q25 financial results, showcasing impressive growth across strategic regions such as Korea, China, and the US.
Korean Market Highlights:
- Revenue: Achieved KRW 653.1 billion, marking a 14% YoY increase.
- Operating Profit: Skyrocketed to KRW 59.9 billion, reflecting an 85% YoY surge.
- Growth Drivers: Strong demand in sun care indie brands, which are significantly outpacing the older, declining legacy brands. Notably, domestic sales hit KRW 274.3 billion, up 11% YoY, as indie brand popularity continues to rise.
With Q2 marking the peak season for sun care, increased order volumes from key brands are anticipated, likely to further bolster top-line growth. Legacy brands, now estimated at a mere 10% of the brand mix (down from 40%), will naturally give way to stronger margin potential, reflected in the strengthened operating margin of 12.4%—the strongest Q1 margin in the company's history.
China Market Update:
- Sales: Increased to KRW 41.6 billion, a 20% YoY uplift.
- Operating Profit: Increased significantly by 72% YoY to KRW 3.1 billion with an OPM of 7.5%.
China’s turnaround is notable, overcoming previous challenges around unit price negotiations, reviving sun care order volumes and maintaining positive momentum.
US Market Advancement:
- Sales: Soared by 210% YoY to KRW 21.7 billion.
- Operating Profit: Positive with an OPM of 6.9%, enhancing by KRW 300 million QoQ.
The US segment continues to excel, driven by robust orders among key customers and the acquisition of new clients in base makeup. Profitabilities are sustaining meaningful margins for the second quarter consecutively.
Investment Outlook:
Kolmar Korea is riding on the dual momentum of sun care demand and attractive US valuations. Anticipation for record domestic margins in Q2 aligns with the expected completion of its second US plant in June. Proactive client engagement is ongoing, thanks to tariff adjustments favoring onshore production. As a result, the 25-year US revenue guidance is lifted to KRW 90 billion from an initial KRW 80 billion.
The price target is elevated to KRW 110,000 from KRW 92,000, derived from stronger domestic OPM projections (25F at 12.5%) and favorable sector multiples. Despite a trading multiple of 14x 12FM PER, it remains an attractive buy.
Conclusion:
Kolmar Korea exemplifies a compelling investment case, blending strategic market positioning, innovative brand dynamics, and operational efficiency. This mix promises continued shareholder value and growth through both expected and unexpected market evolutions.
This analysis highlights Kolmar Korea’s potential amidst evolving market conditions, offering a detailed insight for investors evaluating growth opportunities in the stocks and sectors.
