Earnings Surprises Await for Peak Season: A BULLINK Portfolio Report
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea has delivered an impressive first quarter in 2025, surpassing market expectations and setting a robust tone for the rest of the year. This report will break down the performance across key regions: Korea, China, and the US, as well as provide insights into the company's strategic positioning and stock valuation.
Korea: Captivating Domestic Growth
Kolmar Korea's domestic operations reported revenue of KRW 274.3 billion, marking an 11% year-on-year increase. The primary driver of this growth is the indie sun care brands, which have outpaced the traditional legacy brands in the market. As these indie brands continue to capture more market share, accounting for up to 40% of sales in this segment, we anticipate an even stronger Q2 performance with the onset of peak sun care season. The optimized product mix, particularly the improved Sun Care and Hero SKU, has bolstered operating margins to a record-breaking 12.4% for Q1.
China: A Rebound in the Making
China's market, previously a laggard, recorded a positive turnaround with sales improving by 20% year-on-year, reaching KRW 41.6 billion. The operating profit also saw a significant lift at 72% year-on-year growth. This resurgence is attributed to the resolution of prior unit price negotiation issues, setting the stage for expanding sun care orders moving forward.
US: A Beacon of Growth
The US operations continue to demonstrate solid growth, with sales skyrocketing by 210% year-on-year to KRW 21.7 billion. The operating profit also showed positive trends, enhancing by KRW 300 million sequentially. The acquisition of new base makeup clients and a robust order intake from key customers signal promising profitability trends for subsequent quarters.
Strategic and Valuation Insights
Kolmar Korea is currently benefitting from dual forces—momentum in sun care and favorable US market valuations. With a peak order season in swing and confirmed completions for its second US plant in June, the company is well-positioned to capitalize on new onshore production opportunities precipitated by recent tariff policies. As a result, US revenue guidance for 2025 has been raised from KRW80 billion to KRW90 billion.
Consequently, we have revised the stock's price target upward to KRW 110,000 from the previous KRW 92,000. This revision reflects anticipated domestic OPM improvements of 12.5% and industry multiple-driven valuation increases. With the stock trading at an accessible 14x 12-month forward P/E ratio, a 'Buy' recommendation is maintained given the attractive earnings and valuation prospects.
Conclusion
Kolmar Korea's strategic alignments and market performance underscore a promising earnings trajectory. Investors are poised to benefit from the company's advanced positioning within sun care and its judicious expansion within the US market. As we advance into Q2 and beyond, investors should closely monitor the evolving dynamics in these key markets which could further bolster earnings and stock performance.
Note: This BULLINK report is designed to offer a structured and strategic view into Kolmar Korea's market performance and future prospects, aligning with the needs and expectations of discerning investors.
