BULLINK Portfolio: Earnings Surprises Await for Peak Season
1Q25 Financial Review: Positive Surprises Across Korea, China, and the US Sectors
Overview:
Kolmar Korea has exceeded market predictions in 1Q25, posting robust financial results. Revenues climbed to KRW 653.1 billion, marking a 14% year-over-year increase, and operating profit surged by 85% to KRW 59.9 billion. This growth was fueled by substantial demand in key regions: Korea, China, and the US.
Regional Performance:
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Korea: The domestic market produced KRW 274.3 billion in revenue, an 11% YoY increase, primarily driven by indie brands in the sun care segment. These brands significantly outperform the declining legacy brands, which now constitute merely 10% of the sales mix compared to the previous 40%. With peak sun care season approaching, we anticipate intensified top-line growth. The improved product mix has delivered an exceptional operating margin of 12.4%, our best-ever Q1 result.
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China: Despite previous underperformance, China posted a remarkable rebound with sales of KRW 41.6 billion (+20% YoY) and an operating profit of KRW 3.1 billion (+72% YoY, OPM 7.5%). This improvement is attributed to the resurgence of sun care orders, overcoming past challenges with pricing negotiations.
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United States: Kolmar Korea’s US operations recorded explosive growth with sales skyrocketing to KRW 21.7 billion, a 210% YoY increase, and a positive YoY operating profit reaching KRW 1.5 billion (QoQ +300 million won, OPM 6.9%). This was driven by key customer orders and the onboarding of base makeup clients.
Investment Insight:
The surging momentum in the sun care segment and strengthening US valuations convey significant upside potential. The domestic market is on track for record margins in Q2, driven by a robust order pipeline. The anticipated completion of a second manufacturing plant in the US by June is pivotal, as it aligns with strategic onshoring initiatives amid changing tariff policies. Consequently, we have revised our 2025 US revenue forecast upwards from KRW 80 billion to KRW 90 billion.
Our price target is elevated to KRW 110,000, up from KRW 92,000, reflecting enhanced operating margin expectations (forecasted domestic OPM of 12.5%) and elevated industry multiples. At a current trading valuation of 14x 12FM PER, the stock remains attractively positioned. We maintain a 'Buy' recommendation, supported by the company’s strong performance trajectory.
Example Analysis in Context:
Take for instance, NIO Inc., the Chinese electric vehicle maker that similarly showed unexpected profit margins in early 2024 due to efficient cost management and a strategic shift in focus towards higher-margin come midfield SUVs. Such unforeseen earnings uplifts, even amid challenging industry dynamics, can catalyze notable stock revaluations, akin to what we observe with Kolmar Korea in the thriving sun care segment.
