Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
In a stunning revelation that has captured the attention of investors globally, Kolmar Korea's first-quarter results for 2025 have not only met but exceeded market predictions. The company has reported revenue figures hitting KRW 653.1 billion, marking a 14% year-over-year increase. Perhaps even more impressive is the operating profit, which soared by 85% to reach KRW 59.9 billion. This meteoric growth seems to span multiple geographic markets, notably Korea, China, and the United States.
In the domestic market, Kolmar Korea's sales soared to KRW 274.3 billion, an 11% increase compared to last year. This uptick is largely attributed to the burgeoning success of niche sun care indie brands, which are vastly outpacing traditional brand sales and showing remarkable resilience amidst market shifts. As we enter Q2, the peak season for sun care products, orders are projected to spike. Interestingly, the company anticipates accelerated top-line growth as legacy brand sales continue to wane, forecasting a shift from a 40% dominance in previous years to just 10%. Operating margins have consequently reached a record 12.4% for Q1, driven by an improved mix of sun care and Hero SKU products.
In China, a market that has historically underperformed, Kolmar Korea achieved unexpectedly strong results. Sales surged to KRW 41.6 billion, a 20% year-over-year increase, while operating profit climbed to KRW 3.1 billion, up 72% YoY with an operating profit margin of 7.5%. This represents a significant turnaround from last year when high-profile sun care customers dialed back orders due to price negotiations. Prospects for sustained growth look promising.
The U.S. market stands out with an impressive 210% year-over-year sales growth, amounting to KRW 21.7 billion, complemented by an operating profit of KRW 1.5 billion. Orders were robust across core clients, spurred by new product lines and the acquisition of new base makeup customers. Profitability has remained on an upward trajectory for the second consecutive quarter, achieving meaningful margins.
Attractively Positioned for Earnings and Valuation
The bullish sentiment surrounding Kolmar Korea's stock is buoyed by strong momentum in sun care products and compelling valuation prospects in the U.S. market. With peak season in full swing, a robust order book underpins expectations of record domestic margins come Q2. Additionally, a second production facility in the U.S. is slated for completion in June. This expansion has already caught the interest of numerous brands eyeing onshore production, given recent tariff policies. Reflecting these developments, the company has revised its U.S. revenue guidance for 2025 upwards, from KRW 80 billion to KRW 90 billion.
Consequently, Kolmar Korea's stock price target has been adjusted to KRW 110,000, up from KRW 92,000, reflecting heightened earnings estimates and an improved industry valuation multiple. Currently trading at 14x the 12-month forward P/E ratio, the stock remains an enticing acquisition. Our recommendation is to maintain a "Buy" stance.
This analysis has undergone translation with DeepL.com (free version).
