BULLINK Portfolio: Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
In the bustling arenas of Korea, China, and the US, Kolmar Korea has delivered a stellar 1Q25 performance that exceeded market expectations. With a revenue of KRW 653.1 billion, marking a 14% increase year-over-year, and an impressive operating profit of KRW 59.9 billion, up 85% YoY, the company has showcased robust growth and operational efficiency across its key markets.
Korean Market: Dominance in Sun Care
Korean domestic sales surged to KRW 274.3 billion, an 11% YoY growth, propelled by the remarkable performance of sun care indie brands. These indie brands are outperforming, while traditional legacy brands are witnessing a decline. As the Q2 peak season for sun care approaches, we anticipate a further uptick in top-line growth, with legacy brands' market share estimation decreasing from 40% to 10%. This structural shift, coupled with a refined SKU mix, has elevated the operating margin to an unprecedented 12.4% for Q1.
China: A Turnaround Story
In China, Kolmar Korea reported strong results, with sales reaching KRW 41.6 billion, a 20% increase YoY, and an operating profit of KRW 3.1 billion, soaring 72% YoY, achieving an OPM of 7.5%. Overcoming last year's hurdles regarding unit price negotiations, China's sun care orders are predicted to witness expansion, sustaining this positive momentum.
US Market: A Hub of Growth
The US segment continues its trajectory of significant sales growth, with revenues rocketing by 210% YoY to 21.7 billion won, and an operating profit turning positive at 1.5 billion won, marking an increase of 300 million won QoQ, with an OPM of 6.9%. The US market's vitality is buoyed by strong order inflows from key customers and the acquisition of new contracts in the base makeup segment. Profit margins have remained healthy for two consecutive quarters.
Attractive Earnings and Valuation Prospects
Kolmar Korea's stock is fuelled by increasing momentum in the sun care sector and improvements in US operations. With the sun care segment registering strong pre-season orders, Q2 is poised to break domestic margin records. Meanwhile, the completion of a second US plant in June reinforces the company’s growth outlook. Active negotiations with multiple brands for onshore production post-tariff policy decisions fortify our confidence. Consequently, we are revising our US revenue guidance for 2025 upwards from KRW 80 billion to KRW 90 billion.
We've raised our price target to KRW 110,000, up from KRW 92,000, reflecting both elevated estimates (25F domestic OPM of 12.5%) and improved industry valuations. Trading at 14x 12FM PER, the stock remains an attractive buy, offering compelling valuation opportunity.
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