BULLINK Portfolio Article: Earnings Surprises Await for Peak Season
Global Market Shocks in 1Q25: Korea, China, and US Set the Stage
Kolmar Korea's Upsurge: A 1Q25 Review
Kolmar Korea has delivered a stellar performance in 1Q25 that has taken market analysts by surprise. With a reported revenue of KRW 653.1 billion, marking a 14% increase YoY, and an operating profit of KRW 59.9 billion, an impressive 85% YoY rise, the company demonstrated significant growth. This robust performance was powered by substantial gains across its key markets—Korea, China, and the US.
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Korean Market Dynamics:
Domestic sales were a highlight, clocking in at KRW 274.3 billion, up by 11% YoY. This surge was primarily driven by the burgeoning sun care indie brands sector. As the demand for cutting-edge sun care products outpaces legacy brands, future growth looks promising. The anticipated peak season in Q2 is expected to amplify orders even further, with an estimated shift from a 40% to a 10% share of legacy brands. Such strategic positioning has propelled operating margins to an unprecedented 12.4% in Q1. -
China's Unexpected Gains:
In a market where potential had previously dimmed, China posted sales of KRW 41.6 billion (+20% YoY). Operating profits soared by 72%, reaching KRW 3.1 billion with an OPM of 7.5%. After a challenging prior year marred by pricing disputes, the revival of sun care orders suggests a turnaround that could sustain its momentum. -
US Market Expansion:
The US outshone expectations with sales hitting KRW 21.7 billion, up by a staggering 210% YoY. Operating profits not only turned positive but also showed a quarter-over-quarter rise of KRW 300 million, posting an OPM of 6.9%. With new product launches and an expanding client base, including reputable base makeup brands, the US market is poised for continued profitability in successive quarters.
Strategic Outlook: Earnings and Valuation
Kolmar Korea’s stock momentum is underpinned by its thriving sun care segment and favorable US valuations. There's a palpable energy surrounding the sun care peak season, and with domestic margins expected to reach new heights in Q2, the outlook is optimistic. The imminent completion of a second production plant in the US by June fortifies this progress. Alongside existing commitments, negotiations with various brands to leverage onshore production provide a bullish outlook. This development has prompted a revision of our US revenue forecast for 2025 from KRW 80 billion to KRW 90 billion.
In light of enhanced forecasts—specifically a 25F domestic OPM of 12.5%—and stronger industry valuations, we are revising our price target upwards to KRW 110,000 from KRW 92,000. Trading at a current PER of 14x 12FM, the stock remains a worthwhile investment. Our "Buy" recommendation stands firm.
By fostering informed decision-making through precise analysis, this BULLINK article encapsulates the potential trajectory for Kolmar Korea, deriving meaningful insights from unexpected market trends.
