Earnings Surprises Await for Peak Season: BULLINK Portfolio Analysis
Executive Summary:
Kolmar Korea has demonstrated remarkable growth in 1Q25, outperforming market expectations. Strong performance from Korea, China, and the US has significantly bolstered its earnings. With strategic expansions and improving operational metrics, Kolmar is poised to strengthen its market position during the peak season.
Detailed Analysis:
1Q25 Performance Review:
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Revenue and Profitability: Kolmar Korea reported a revenue of KRW 653.1 billion (+14% YoY) and an operating profit of KRW 59.9 billion (+85% YoY). Superior operating leverage was realized across Korea, China, and the US.
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Korean Market Dominance: Domestic sales surged to KRW 274.3 billion (+11% YoY), led by indie sun care brands significantly outperforming traditional brands. The transition from legacy to contemporary indie brands, which are expected to form only 10% of sales compared to 40% previously, signals a strategic pivot that fortifies market presence.
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China's Resurgence: China's performance exceeded expectations with a 20% YoY increase in sales, amounting to KRW 41.6 billion and operating profit of KRW 3.1 billion (+72% YoY). Overcoming negotiation issues from the prior year, the region is expected to maintain its growth trajectory driven by expanding sun care demands.
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U.S. Expansion: The U.S. market showed a sales jump to KRW 21.7 billion (+210% YoY) with an operating profit marking its second consecutive quarter of positive growth, noted at KRW 1.5 billion (OPM 6.9%). The momentum is supported by a robust order book and new customer acquisition.
Strategic Insights:
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Sun Care Momentum: With sun care products demonstrating strong demand, Kolmar is set to capitalize on the upcoming peak season. Domestic margins are projected to hit record levels in Q2.
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U.S. Operational Growth: The completion of the second production plant in June and ongoing negotiations for onshore production creates a strong growth outlook. The forecasted increase in U.S. revenue from KRW 80 billion to KRW 90 billion underlies this optimistic expansion.
Investment Implications:
Kolmar Korea’s stock, propelled by sun care momentum and strategic U.S. expansion, offers an attractive valuation. Currently trading at 14x 12FM PER, which is deemed affordable. The raised price target to KRW 110,000 (from KRW 92,000) reflects anticipated operational margins and industry multiples.
Portfolio Recommendation:
- Action: Buy remains in effect.
- Target Price: KRW 110,000
- Rationale: Strong domestic and international growth, enhanced operational efficiency, and favorable market conditions support the bullish outlook.
By continuing to adapt to market shifts and expanding strategically in key regions, Kolmar Korea stands at the forefront of capturing market share, ensuring long-term investor value through growth and profitability.
Disclosure:
This BULLINK report is prepared for informational purposes only, reflecting analytical insights and market trends. Investors should consider their individual investment needs and risk tolerance before making investment decisions.
