BULLINK Portfolio: Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea Surpasses Expectations
Kolmar Korea's impressive results for the first quarter of 2025 have caught the market by surprise, exceeding forecasts with revenue reaching KRW 653.1 billion, a 14% increase year-on-year, and operating profit hitting KRW 59.9 billion, up by a whopping 85% YoY. This growth is driven by substantial operating leverage across major regions including Korea, China, and the US.
Domestic Growth Driven by Indie Brands
In Korea, domestic sales surged to KRW 274.3 billion, up 11% from last year, fueled by a robust performance of sun care indie brands. These brands are outshining traditional legacy brands, which are witnessing a decline. With Q2 marking the peak season for sun care products, the order volume for key brands is set to rise, potentially replacing legacy brands, which currently have a smaller market share (estimated at 10% versus the previous 40%). The favourable Sun Care and Hero SKU mix boosted the operating margin to a remarkable 12.4%, marking the best Q1 margin in the company's history.
Unexpected Strong Performance in China
China, previously a laggard, registered unexpectedly strong results with sales amounting to KRW 41.6 billion, a 20% growth YoY, and an operating profit of KRW 3.1 billion, a substantial 72% increase YoY, with an OPM of 7.5%. Following last year's sluggish sun care orders due to unit price negotiations, there is renewed optimism as orders expand, indicating an upward trajectory.
The US Continues High Growth
The US market continues to outpace expectations with sales skyrocketing to KRW 21.7 billion, a 210% YoY growth, and an operating profit reaching KRW 1.5 billion. The addition of new key customers, especially in base makeup, and innovative product launches have bolstered profitability, maintaining a positive margin for the second quarter running.
Earnings and Valuation: A Bullish Outlook
Kolmar Korea's stock is riding high on the momentum in the sun care segment and attractive US valuations. The sun care segment is experiencing a strong demand cycle, promising record domestic margins in the forthcoming quarter. Additionally, with the second plant in the US on track for June completion, the company is poised for further growth. Active discussions with several brands regarding onshore production post-tariff policy signify potential expansion. With this momentum, the 2025 US revenue guidance is revised upward from KRW 80 billion to KRW 90 billion.
Price Target and Valuation
Factoring in heightened domestic operational margins (estimated at 12.5% by 2025) and improved valuation metrics, we elevate our price target from KRW 92,000 to KRW 110,000. Currently trading at an affordable 14x 12FM PER, Kolmar Korea remains a compelling buy.
This comprehensive report positions Kolmar Korea as a standout performer, leveraging its diverse market operations across Korea, China, and the US, cementing its status as a key player in the cosmetics industry. As the company navigates peak season with robust strategies, stakeholders can anticipate continued positive momentum and substantial returns.
