BULLINK Portfolio: Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's first quarter of 2025 has startled the market with exceptional performance, posting a revenue of KRW 653.1 billion, marking a substantial 14% increase year-on-year. Even more impressive is the operating profit, which soared by 85% YOY to KRW 59.9 billion, showcasing robust growth and operational leverage across its major markets, including Korea, China, and the United States.
Korea: A Robust Domestic Market Fueled by Indie Brands
Domestic sales reached KRW 274.3 billion, up 11% year-on-year. This growth was significantly driven by the rising popularity of sun care indie brands, which are outpacing the performance of traditional legacy brands. With Q2 being the peak season for sun care products, we are witnessing a surge in orders for these key brands. Interestingly, while legacy brands are projected to dwindle from 40% to 10%, top-line growth is expected to intensify. The improved mix of sun care and hero SKUs has pushed our Q1 operating margin to an unprecedented 12.4%.
China: Unexpected Resurgence in Sales and Profits
China has historically underperformed, but this quarter has recorded unexpectedly strong results. Sales climbed to KRW 41.6 billion, a 20% rise YOY, coupled with a significant leap in operating profit to KRW 3.1 billion, up 72% YOY, with an operating margin of 7.5%. Last year’s slump in sun care orders due to pricing negotiation issues seems to have been reversed, and we expect the uptrend to persist.
US: Stellar Growth Trajectory Continues
The US market continues to display an impressive growth trajectory, with a sales spike to KRW 21.7 billion, a whopping 210% YOY increase. Operating profit has turned positive, rising by KRW 300 million quarter-on-quarter to reach 1.5 billion, maintaining a solid 6.9% operating margin. The momentum is driven by strong orders from key customers, including new product lines and secured new base makeup customers. Profits have consistently improved over the past two quarters.
Earnings and Valuation: A Compelling Narrative
Kolmar Korea is benefiting from two positive driving forces: a booming sun care sector and favorable valuations in the US market. With a robust order book, we forecast record domestic margins in Q2. Additionally, the US market is poised for further expansion with the impending completion of a second plant in June. We are in discussions with several brands for onshore production, incentivized by recent tariff policies. This growth leads us to revise our 2025 US revenue guidance from KRW 80 billion to KRW 90 billion.
Consequently, we are increasing our price target from KRW 92,000 to KRW 110,000 to mirror our elevated estimates (with domestic operational margin forecasted at 12.5% for 2025) and improved valuations based on industry multiples. Trading at 14x 12FM PER, the stock remains affordable, and we reaffirm our 'Buy' stance.
Converted to BULLINK format, ensuring data clarity and investment insights for strategic positioning.
