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Bullink Portfolio Highlight: Kolmar Korea's Earnings Beat Expectations
Overview of 1Q25 Results: A Trifecta of Performance in Korea, China, and the US
Kolmar Korea has braved market forecasts with extraordinary 1Q25 results, showcasing a robust revenue of KRW 653.1 billion, marking a 14% year-on-year (YoY) uptick, and an operating profit of KRW 59.9 billion, which represents an impressive 85% YoY increase. The company's dynamic growth trajectory and operational leverage have entrenched its success in key regions: Korea, China, and the US, setting the stage for an impactful peak season.
Sector Insights and Regional Dynamics
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Korean Market Expansion: Securing prompt domestic sales of KRW 274.3 billion (+11% YoY), Kolmar Korea capitalized on the burgeoning demand for sun care indie brands. These burgeoning brands have demonstrated significant growth, eclipsing legacy brands which are in a downward trend. Notably, Q2 is poised to be a pinnacle period for sun care, with a bolstered order influx anticipated for major brands. We project legacy brands to make up only 10% of sales compared to past figures of 40%. The refined Sun Care and Hero SKU mix has elevated the operating margin to a historic high of 12.4% for Q1.
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Driving Growth in China: Once a lagging performer, China reported a fortuitous surge with sales heightening to KRW41.6 billion (+20% YoY) alongside an operating profit of KRW3.1 billion (+72% YoY, OPM 7.5%). The recovery is credited to revived sun care orders following resolved pricing negotiations, reflecting robust momentum expected to continue.
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U.S. Profitability and Expansion: The U.S. market has maintained its trajectory with a remarkable sales spike of 210% YoY, reaching 21.7 billion won, and an operating profit that turned positive with an additional QoQ 300 million won, securing an OPM of 6.9%. Expansion of orders from key clients, introduction of novel products, and the onboarding of new base makeup clientele contribute to this growth. Profits are on a steadfast uptrend, marking two consecutive quarters of notable margins.
Strategic Valuation and Future Projections
Kolmar Korea’s stock is predominantly buoyed by two key factors: surging suncare demand and strategic valuation in the US sector. Domestically, record margins are expected in the upcoming quarter, while the U.S. landscape is set for a transformative phase with the imminent completion of a second plant in June. As tariff policies shift favoring onshore production, Kolmar Korea is in deliberations with various brands to leverage these conditions. Consequently, US revenue guidance for the year has been elevated from KRW80 billion to KRW90 billion.
Reflecting these bullish estimates and a favorable industry valuation, we have escalated the price target from KRW92,000 to a robust KRW110,000. Trading at 14x 12FM PER, the stock retains its appeal as a value proposition. The "Buy" recommendation remains affirmatively in place, underscoring its promising potential for investors.
Conclusion
Kolmar Korea’s earnings outlook and strategic ventures underscore a compelling narrative for sustained growth and value appreciation. With an assertive market position and strategic expansions, stakeholders are poised to reap substantial benefits in the unfolding quarters.
This portfolio narrative encapsulates the strategic insights and potential investment avenues aligning with BULLINK's expectations and expertise.
