BULLINK Portfolio Report: Earnings Surprises Await for Peak Season
Title: 1Q25 Review: Korea, China, and US Surprises
Korea's Kolmar Delivers a Strong Performance
Kolmar Korea's performance for the first quarter of 2025 has taken many analysts by surprise, surpassing market expectations considerably. The company reported a remarkable revenue growth of 14% year-over-year, reaching KRW 653.1 billion, and a significant 85% increase in operating profit, totaling KRW 59.9 billion. These results highlight Kolmar's robust operational strategy and strong leverage, particularly in key regions such as Korea, China, and the US.
Driving Growth in Korea
In the Korean market, domestic sales surged to KRW 274.3 billion, marking an 11% increase year-over-year. A significant factor contributing to this growth is the burgeoning demand for sun care indie brands, outpacing the performance of legacy brands, which are declining. As we enter Q2—an especially critical period for sun care products—demand is projected to rise even further. The improved product mix, focusing on sun care and Hero SKUs, has elevated the operating margin to an unprecedented 12.4% for Q1.
Unexpected Upswing in China
China, a market that had seen underperformance, showed a refreshing turnaround with sales reaching KRW 41.6 billion—a 20% rise from the previous year. Operating profit also climbed by 72% year-over-year to KRW 3.1 billion, with an operating margin of 7.5%. Last year's negotiations around unit pricing had initially hindered sun care orders, but this year reflects a restoration in demand that is likely to persist.
The US Market's Exponential Growth
Kolmar's US operations continue to experience exponential growth, affirming their strategic market positioning. Sales soared by an impressive 210% year-over-year to 21.7 billion won, with operating profits turning positive and expanding by 300 million won quarter-over-quarter, achieving an operating margin of 6.9%. The company secured orders from pivotal customers and onboarded new base makeup clients, bolstering its profitability for the second quarter in a row.
Earnings Outlook and Valuation Dynamics
Kolmar Korea’s stock momentum is benefiting from robust sun care sales and US valuation improvements. The high demand during the sun care peak season is expected to set new records for domestic margins in Q2. Furthermore, the anticipated June completion of Kolmar's second US plant expands its operational capacity and aligns with strategic objectives post-tariff policy reassessment. As orders for Plant 1 grow and Plant 2's sales ramp up, the 2025 US revenue forecast has been adjusted upwards, from KRW 80 billion to KRW 90 billion.
In acknowledgment of these positive developments, the price target for Kolmar Korea has been revised from KRW 92,000 to KRW 110,000. This adjustment accounts for projected domestic OPM improvements to 12.5% in 2025 and a revaluation using current industry multiples. Trading currently at 14x the 12-month forward price-earnings ratio, the stock remains a compelling buy.
Conclusion
Kolmar Korea's outstanding performance in 1Q25 reinforces its strategic prowess across key markets, with an impressive foothold in the US, a comeback in China, and pioneering sun care innovations driving domestic growth. The company's strategic initiatives and operational efficiencies position it for sustained success as it navigates peak season dynamics and expanding market engagements.
