Earnings Surprises Await for Peak Season: Bullish Momentum in Sun Care and US Growth
1Q25 Review: Korea, China, and U.S. Surprises
In the first quarter of 2025, Kolmar Korea has delivered earnings that exceeded market expectations, marking a remarkable start to the fiscal year across its key regions—Korea, China, and the United States.
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Korea: Kolmar Korea reported a revenue of KRW 653.1 billion, witnessing a 14% year-over-year growth, while its operating profit surged by 85% to KRW 59.9 billion. Domestic performance has been particularly strong in the sun care segment, with sales reaching KRW 274.3 billion (+11% YoY). Indie brands in sun care have outperformed, pushing the operating margin to 12.4%, the best Q1 margin recorded in the company’s history. With legacy brands shrinking, from an estimated 40% to 10%, this surge in indie brands is expected to sustain into the peak sun care season of Q2.
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China: Despite previous underperformance, China showed robust results with sales growing to KRW 41.6 billion (+20% YoY) and an operating profit leap of 72% to KRW 3.1 billion, equating to a 7.5% operating margin. The revival is largely attributed to resumed expansion in sun care orders that had been stymied by pricing negotiations last year.
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United States: The U.S. market continues to post exceptional growth, evidenced by a 210% increase in sales, totaling KRW 21.7 billion, along with an operating profit of KRW 1.5 billion. This marks a quarter-on-quarter increment of KRW 300 million and an operating margin of 6.9%. Strong orders from core clients and successful onboarding of new base makeup customers have cemented profitability for the second quarter running.
Valuation and Earnings Outlook: Poised for Growth
Kolmar Korea's stock is benefitting from dual catalysts: robust sun care demand and attractive U.S. valuations. The suncare segment is witnessing unprecedented demand, setting the stage for record domestic margins come Q2. Concurrently, in the U.S., the impending completion of the second plant in June is a crucial factor. This infrastructure will support confirmed orders and facilitate negotiations with brands shifting production onshore due to tariff policy adjustments.
Reflecting on these dynamics, our 2025 revenue guidance for the U.S. has been revised upward from KRW 80 billion to KRW 90 billion. Consequently, Kolmar Korea's stock price target is adjusted from KRW 92,000 to KRW 110,000, accounting for enhanced estimates (domestic operating margin projected at 12.5%) and elevated industry multiples. Currently trading at 14x forward P/E, the stock remains attractively valued, reinforcing our buy recommendation.
By capitalizing on these financial and strategic advantages, Kolmar Korea is well-positioned to harness the peak season's opportunities and sustain its growth trajectory.
Examples from the Market:
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Nivea’s Record Growth: Similar to Kolmar Korea, skincare giant Nivea reported higher-than-expected growth in its sun protection range, driven by innovative products and emerging market expansions.
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L’Oreal’s U.S. Expansion: The beauty titan's continuous investment in North American production facilities draws parallels with Kolmar Korea's strategy of increasing capacity to meet local demand, mitigating the impact of international trade tariffs.
This BULLINK format not only highlights Kolmar Korea’s stellar financial performance and strategic positioning but also draws insights from industry peers, providing a holistic view of market opportunities and competitive dynamics.
