Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea has delivered an impressive first quarter with results surpassing market expectations, showcasing robust growth across key regions: Korea, China, and the United States.
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Korea Segment:
- Revenue: KRW 653.1 billion (+14% YoY)
- Operating Profit: KRW 59.9 billion (+85% YoY)
- Highlights: Domestic sales showed a strong increase to KRW 274.3 billion (+11% YoY), primarily fueled by the booming demand for sun care indie brands. Notably, these indie brands are outpacing legacy brands, which are seeing a contraction. With the peak sun care season approaching, further top-line growth is anticipated.
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China Segment:
- Sales: KRW 41.6 billion (+20% YoY)
- Operating Profit: KRW 3.1 billion (+72% YoY) with an operating margin of 7.5%
- Highlights: Despite last year's challenges, including unit price negotiation issues, the sun care sector is rebounding strongly. The forecast remains optimistic as order volumes are expected to remain robust.
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US Segment:
- Sales: KRW 21.7 billion (+210% YoY)
- Operating Profit: 1.5 billion won (QoQ +300 million won, OPM 6.9%)
- Highlights: Significant growth driven by existing and new customers, especially in base makeup products, is translating into tangible profitability improvements.
Earnings and Valuation Outlook
- Momentum Drivers: Kolmar Korea's stock continues to be buoyed by the strength of its sun care portfolio and favorable valuation dynamics in the US market.
- Market Expectations: The sun care segment, bolstered by a robust order book during its peak season, sets the stage for record domestic margins in Q2. In the US, the completion of a second manufacturing facility by June promises to unlock further growth, aided by opportunities post-tariff policy.
- Revised Projections: Given the strong sales figures from Plant 1 and expected contributions from Plant 2, Kolmar Korea has revised its 2025 US revenue guidance upward from KRW 80 billion to KRW 90 billion.
Investment Perspective
- Price Target Adjustment: The price target for Kolmar Korea has been elevated from KRW 92,000 to KRW 110,000, reflecting improved estimates and industry valuation multiples.
- Valuation Insights: Currently trading at 14x 12FM PER, the stock remains attractive, underpinning our Buy recommendation.
Kolmar Korea's performance underscores a strategic balance between expanding indie brand prominence and leveraging new market opportunities, ensuring a promising outlook for astute investors.
