Stock Insights & Market Dynamics: Bullink Portfolio Edition
Earnings Surprises Await for Peak Season
1Q25 Performance Analysis: Market Surprises in Korea, China, and the US
Kolmar Korea: Leveraging Operational Strength Across Key Markets
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Korea: In the first quarter of 2025, Kolmar Korea reported impressive numbers, far exceeding market projections with revenues reaching KRW 653.1 billion, marking a 14% year-over-year (YoY) increase. Additionally, operating profit surged by a significant 85% YoY, totaling KRW 59.9 billion. This exceptional performance reflects the strong growth and operational leverage achieved across pivotal markets, namely Korea, China, and the United States.
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Domestic Growth: Domestic sales climbed to KRW 274.3 billion (+11% YoY), driven by the exceptional performance of indie brands within the sun care segment. Unlike declining legacy brands, these indie brands are experiencing remarkable growth, especially as Q2 signifies the peak season for sun care products. Market dynamics suggest top-line growth will accelerate, propelled by the shrinking share of legacy brands, estimated to decline from 40% to approximately 10%. Enhanced product mix in sun care and strategic Hero SKUs led to an unprecedented Q1 operating margin of 12.4%.
China's Unexpected Resurgence
- Market Rebound: Despite previous underperformance, China exhibited robust results with sales of KRW 41.6 billion (+20% YoY) and an operating profit of KRW 3.1 billion (+72% YoY, operating profit margin (OPM) at 7.5%). Challenges concerning price negotiations have mitigated, resulting in expanding sun care orders, a trend that seems set to persist.
US Market Dynamics: High Growth Trajectory
- Sales & Profitability Upswing: The US market continued to demonstrate significant growth momentum. Sales in the region surged by 210% YoY to KRW 21.7 billion, with operating profits reaching KRW 1.5 billion (YoY positive, quarter-over-quarter (QoQ) increase of KRW 300 million, OPM at 6.9%). The positive trend is aligned with strong orders from key customers and securing new base makeup clients. For the second consecutive quarter, profitability is showcasing meaningful margin improvements.
Investment Outlook: Earnings and Valuation Poised for Upside
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Sun Care & US Valuation: Sun care's robust order flow during the peak season and favorable valuation in the US are the major growth drivers. Anticipated record domestic margins in Q2 further enhance this potential. Additionally, with the second plant in the US nearing completion by June, and ongoing collaborations with brands for onshore production post-tariff policy adjustments, the outlook is incredibly promising. Consequently, 25-year US revenue guidance has been uplifted from KRW 80 billion to KRW 90 billion, reflecting new orders and sales trends stemming from both plants.
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Revised Target & Valuation: Our price target is adjusted upward to KRW 110,000 from KRW 92,000, factoring in enhanced domestic operating profit margins (25F domestic OPM of 12.5%) and elevated industry valuation multiples. Currently trading at 14x forward 12-month price-to-earnings ratio (PER), the stock remains attractively priced. Our stance is firmly recommendation: Buy.
Conclusion: Kolmar Korea is strategically positioned to harness peak season advantages, translating operational efficiencies across critical geographic regions into substantial shareholder value. Investors are advised to capitalize on the current momentum, underscored by favorable valuations and an optimistic earnings outlook.
