BULLINK Portfolio Report
Sector Focus: Cosmetics & Skincare
Earnings Surprises Await for Peak Season
1Q25 Analysis: Global Performance Highlights
Kolmar Korea's Unanticipated Surge
Kolmar Korea's Q1 2025 financial performance delivered unexpected earnings surprises, outperforming market forecasts across key regions: Korea, China, and the United States. The company's revenue soared to KRW 653.1 billion, marking a 14% year-over-year increase, while operating profit experienced a substantial leap of 85%, reaching KRW 59.9 billion. This impressive performance underscores Kolmar Korea’s robust growth trajectory and operating leverage.
Market Dynamics: A Closer Look
South Korea: Indie Brands Leading the Charge
In its domestic market, Kolmar Korea achieved sales of KRW 274.3 billion, an 11% increase compared to the previous year. This growth was primarily fueled by the burgeoning demand for sun care indie brands, which are notably outperforming legacy brands. As we enter the peak sun care season, there is a significant influx of orders for these key brands, projecting even stronger top-line growth ahead. The product mix improvements in sun care and Hero SKUs have propelled the operating margin to a record 12.4% for Q1.
China: A Rebound Story
Despite previous underperformance, China registered an unexpectedly strong recovery, with sales reaching KRW 41.6 billion, up 20% from the prior year. Operating profit surged by 72%, driven by renewed sun care orders from major clientele, overcoming recent pricing negotiations that had hindered last year’s performance. The positive momentum is anticipated to sustain in the near term.
United States: A High-Growth Market
In the U.S market, Kolmar Korea sustained its impressive growth trajectory, reflected in a staggering 210% year-over-year sales increase to 21.7 billion won. The operating profit turned positive, showing a quarterly increase of 300 million won, with an operating margin at 6.9%. The company successfully secured new clients for base makeup products, indicating continuing profitability.
Investment Potential: A Strategic Perspective
Kolmar Korea’s stock is being buoyed by burgeoning demand in the sun care sector and favorable valuations in the U.S. The outlook is further bolstered by expectations of record domestic margins in Q2. Of notable mention is the forthcoming completion of a second manufacturing facility in the U.S. by June, poised to enhance capacity and client engagement post-tariff amendments.
The momentum from its robust order book and anticipated completion of Plant 2 has prompted us to revise our U.S. revenue forecast for the year 2025, lifting it from KRW 80 billion to KRW 90 billion.
Valuation Outlook: Upside Potential Affirmed
In light of robust financial forecasts (domestic OPM of 12.5% for 2025) and favorable sector multiples, we've raised our price target for Kolmar Korea to KRW 110,000, up from KRW 92,000. With the stock trading at an affordable 14x forward P/E ratio, we maintain a "Buy" rating.
Conclusion
Kolmar Korea's adept navigation of industry dynamics and strategic initiatives underscore considerable growth prospects and investment value within the global cosmetics & skincare landscape. As the company capitalizes on peak seasonal demand and expands its manufacturing footprint, it presents an attractive proposition for investors seeking exposure to this high-potential market segment.
Example References:
- Example 1: "Sun Care Brands Shine During Peak Season in Asia," MarketWatch, April 2025.
- Example 2: "U.S. Manufacturing Capacity Expansion in the Cosmetics Industry," Bloomberg, May 2025.
- Example 3: "Skincare Behemoth Kolmar Korea Reports Record Q1 Margins," Reuters, April 2025.
Disclaimer: This publication is for informational purposes only. It is not intended as investment advice.uj
