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BULLINK Report: Kolmar Korea's Exceptional Performance across Key Markets
Earnings Surprises Await for Peak Season
1Q25 Review: Unanticipated Upswings in Korea, China, and the US
Kolmar Korea delivered a sterling performance in 1Q25, significantly exceeding market forecasts. The company reported revenue of KRW 653.1 billion, a robust 14% year-over-year (YoY) increase, alongside a striking 85% YoY rise in operating profit to KRW 59.9 billion. This exceptional growth outpaced expectations across its primary regions: Korea, China, and the United States.
Domestic Expansion Driven by Indie Brands
In Korea, sales rose to KRW 274.3 billion, marking an 11% YoY escalation. This uptick was primarily influenced by the escalating demand for sun care indie brands, which have been outperforming traditional legacy brands that are currently in decline (expected to drop to 10% from 40%). As Q2 heralds the peak season for sun care products, Kolmar Korea has secured increasing orders for its key brands. The strategic mix of improved sun care offerings and Hero SKUs propelled the domestic operating margin to a record 12.4% for Q1.
Revival in China’s Sun Care Segment
China revealed promising signs of recovery, with sales surging to KRW 41.6 billion, a notable 20% YoY increase, and operating profit rising by 72% YoY to KRW 3.1 billion. A significant contributor to this resurgence was the resolution of past unit price negotiation challenges, leading to a renewed expansion in sun care orders. The momentum is anticipated to persist.
US Operations: A Powerhouse of Growth
In the United States, Kolmar Korea's growth momentum was unmistakable, with sales skyrocketing by 210% YoY to 21.7 billion won. Operating profit turned positive, notching a 300 million won improvement quarter-on-quarter, corresponding to a 6.9% operating profit margin. Key client orders remained robust, enriched by new product offerings alongside the acquisition of new base makeup customers. Profitability has exhibited a promising trajectory for two consecutive quarters underpinned by meaningful margins.
Valuation and Growth Prospects
Kolmar Korea's stock price is underpinned by the dual pillars of momentum in the sun care sector and strong US valuation prospects, both of which bode positively. The sun care division's buoyant order pipeline, aligned with the peak season, forecasts record domestic margins by Q2. Furthermore, the imminent completion of Kolmar's second US plant in June is a pivotal milestone. This expansion is expected to transition smoothly into sales growth, with multiple brands exploring onshore production post-tariff adjustments. In light of the vigor in Plant 1's orders and Plant 2's sales trajectory, we are elevating our 2025 US revenue projections from KRW 80 billion to KRW 90 billion.
Consequently, our price target has been revised upward to KRW 110,000 from the previous KRW 92,000, factoring in elevated estimates (25F domestic operating margin of 12.5%) and improved industry valuation multiples. With the stock trading at an appealing 14x 12-month forward price-to-earnings ratio, our buying recommendation remains steadfast.
Note: This BULLINK report format is designed for optimal clarity and engagement, highlighting the strategic insights and market analysis derived from Kolmar Korea's performance data.
