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BULLINK Portfolio Insight: Earnings Surprises Herald Bullish Momentum
1Q25 Roundup: Unexpected Gains Across the Board – Korea, China, and US
Kolmar Korea Shines Bright in Q1
Kolmar Korea dazzled in the first quarter with remarkable financial performance, reporting revenues of KRW 653.1 billion, marking a 14% year-over-year increase. The operating profit achieved impressive growth at KRW 59.9 billion, an 85% surge compared to the previous year. This strong financial showing underscores robust operational leverage and effective market strategies in pivotal regions—Korea, China, and the United States.
Key Drivers in Domestic Success
The domestic market showed vigor with sales reaching KRW 274.3 billion, an 11% increase year-over-year. Notably, sun care indie brands have become a significant growth pillar, outperforming traditional legacy brands. With Q2 being the peak season for sun care, demand is anticipated to climb, potentially amplifying growth. As legacy brands contribute only 10% compared to the previous 40%, the shift towards more profitable Sun Care and Hero SKU mixes has propelled operating margins to a record 12.4% for Q1.
China and US Markets: Catalysts for Growth
China’s market resurgence was unexpected but welcomed with sales of KRW 41.6 billion, reflecting a 20% year-on-year growth, coupled with a 72% leap in operating profit. With sun care orders rebounding after last year’s unit price negotiations, growth appears sustainable.
In the US, Kolmar Korea’s gains continued their accelerated pace, with sales hitting 21.7 billion won—an extraordinary 210% year-over-year rise. The operating profit saw a positive leap, evidencing new product success and fresh customer acquisition. Kolmar Korea’s relentless pursuit of better margins has generated profitability for a second successive quarter.
Investment Perspective: Growth and Value on a Positive Trajectory
Kolmar Korea’s stock reflects both the sun care sector's dynamism and a strong valuation uplift in the US. The domestic market is positioned to enjoy record margins in the approaching peak season of Q2. In the US, the June completion of a second plant heralds expanded production capacity and potential new client partnerships, favorably affected by recent tariff policies.
Forecast and Valuation Adjustments
Kolmar Korea's forward-looking U.S. revenue estimates have been upgraded to between KRW 80 billion and KRW 90 billion, driven by Plant 1’s established orders and Plant 2’s burgeoning sales momentum. Consequently, we've lifted our price target from KRW 92,000 to KRW 110,000, aligning with enhanced financial estimates and a robust industry multiple valuation. The current trading at 14x 12FM PER signifies a promising buying opportunity.
Investment Recommendation: Strong Buy
Given the favourable market conditions and strategic advancements, our recommendation is to maintain a 'Buy' position on Kolmar Korea. This investment holds promising prospects backed by solid fundamentals and operational efficiency.
Note: This analysis is compiled based on data available up to the current quarter. Investors should consider potential market volatilities and perform due diligence before making investment decisions.
This BULLINK format combines detailed analysis, actionable insights, and valuation implications to aid investors in making informed decisions.
