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BULLINK Portfolio Insights: Kolmar Korea – Earnings Surprises Await for Peak Season
Overview: 1Q25 Performance Thrives Across Borders
Kolmar Korea's first-quarter 2025 financial results have set a high benchmark, exceeding market expectations with robust figures. The company reported revenues of KRW 653.1 billion, marking a 14% year-over-year increase, and an impressive 85% rise in operating profit to KRW 59.9 billion. This surge is attributed to enhanced growth and operational leverage across its key markets, including Korea, China, and the United States.
Domestic Market Dynamics: A Shift in Sun Care Demand
In its domestic market, Kolmar Korea recorded sales of KRW 274.3 billion, a notable 11% uplift from last year. This growth is predominantly driven by the thriving sun care sector, particularly the emerging indie brands, which are outperforming traditional brands that are on a decline. The onset of peak season has sparked an uptick in orders, promising a stronger top-line growth trajectory. The strategic mix of improved Sun Care and Hero SKUs propelled the operating margin to a record 12.4% for Q1.
China: Overcoming Past Challenges
Despite previous underperformance, China has produced unexpected, strong results with sales reaching KRW 41.6 billion, up by 20% YoY, and an operating profit of KRW 3.1 billion, a 72% increase YoY with an OPM of 7.5%. Last year's sun care orders were hampered by pricing negotiations; however, current indicators suggest a revival in demand, likely to persist in the coming months.
United States: Momentum in High Gear
The US segment exhibited remarkable performance, with sales accelerating by 210% YoY to KRW 21.7 billion and an operating profit turnaround to KRW 1.5 billion. The successful introduction of new products and acquisition of base makeup customers have fortified order volumes. With profitability on a consistent upward trend, meaningful margins are anticipated through consecutive quarters.
Valuation and Future Outlook: A Compelling Case
The stock's momentum is fueled by the sun care sector and US valuations. With the advent of peak season, the order book for sun care remains robust. A promising Q2 is anticipated, particularly with domestic margins trending towards record highs. The completion of a second US plant in June signifies an upcoming boost, further supported by harmonious discussions with several brands for post-tariff policy production. Consequently, US revenue guidance for 2025 has been raised from KRW 80 billion to KRW 90 billion.
We have upwardly revised our price target from KRW 92,000 to KRW 110,000, reflecting heightened estimates (forecasted domestic OPM at 12.5%) and increased industry valuation multiples. Currently trading at an accessible 14x 12FM PER, the stock remains a compelling buy.
This transformation aims to provide a more engaging, expert-like analysis aligned with my BULLINK portfolio style, offering insights into Kolmar Korea's trajectory and potential for stakeholders.
