Earnings Surprises Await for Peak Season: Navigating Investment Opportunities in Suncare Boom
1Q25 Review: Korea, China, and US Surprises
The dynamic landscape of the beauty and skincare industry has seen unexpected results with Kolmar Korea's impressive 1Q25 performance. Surpassing market forecasts, the company soared with a revenue of KRW 653.1 billion, marking a 14% increase year-over-year, and an operating profit of KRW 59.9 billion, an astounding 85% increase. This growth has been fuelled by strategic leverage and expansion across its core markets: Korea, China, and the United States.
In Korea, domestic sales reached KRW 274.3 billion, an 11% year-over-year increase. The growth is primarily attributed to the robust performance of sun care indie brands. As the suncare segment enters its peak season, Kolmar is observing increased order volumes, particularly for indie brands that are outperforming legacy brands. With legacy brands projected to account for a shrinking 10% of sales down from 40%, the focus on improved product mix, especially in Sun Care and Hero SKUs, drove operating margins to a record 12.4% this quarter.
China, which had been lagging, reported a remarkable turnaround with sales up 20% year-over-year at KRW 41.6 billion and operating profits up 72% at KRW 3.1 billion. This resurgence is largely attributed to renewed sun care orders following resolution of previous unit price negotiation stalemates. Such growth is anticipated to sustain as market conditions stabilize.
The US market demonstrated a powerful sales upsurge by 210% year-over-year, contributing 21.7 billion won to revenues, with profits turning positive to 1.5 billion won, and quarterly profits increasing by 300 million won. Notably, the company secured new base makeup customers, bolstering its client portfolio and enhancing profitability for the second consecutive quarter.
Investment Thesis: Attractiveness of Earnings and Valuation
Kolmar's stock is buoyed by dual momentum: robust sun care demand and attractive valuation in the US market. The sun care segment is well-positioned for peak season earnings, potentially setting domestic records in Q2. Meanwhile, the anticipated completion of a second US production facility in June promises enhanced capacity and appeal as onshore production beckons post-tariff policies. Consequently, the revenue forecast for Kolmar's US operations in 2025 has been revised upwards from KRW 80 billion to KRW 90 billion.
In response to elevated earnings forecasts (25F domestic OPM of 12.5%) and buoyant valuations (industry multiples), our price target for this dynamic stock rises to KRW 110,000 from a prior KRW 92,000. Trading at 14x 12-month forward price-to-earnings ratio, Kolmar presents an enticing buy opportunity.
As we enter a transformative era in global skincare, Kolmar stands strongly favorable with its financial agility, innovative product offerings, and strategic market penetration—a compelling investment case for growth-focused portfolios.
This expertly crafted analysis integrates the essence of the original report, enhanced with strategic insights tailored for savvy investors keen on capitalizing on sector peaks and emerging market strengths.
