BULLINK Portfolio Report
Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's Stellar Performance
Kolmar Korea impressed the market with its 1Q25 financial results, showcasing robust growth across key regions. The company reported revenue of KRW 653.1 billion, reflecting a 14% increase year-on-year (YoY), and an extraordinary 85% jump in operating profit to KRW 59.9 billion. This growth is largely attributed to strong operating leverage and performance in Korea, China, and the United States.
Regional Analysis
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Korea: Domestic sales soared to KRW 274.3 billion, marking an 11% YoY growth. This surge was primarily driven by a heightened demand for sun care indie brands, which have significantly outpaced legacy brands. As we approach the peak season for sun care, orders continue to grow, highlighting a strategic shift as legacy brands decline to an estimated 10% of sales compared to 40% previously. Consequently, the operating margin reached a record 12.4%, marking it as the strongest Q1 margin to date.
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China: Despite past underperformance, sales in China reached KRW 41.6 billion, a 20% YoY increase, with operating profit climbing 72% YoY to KRW 3.1 billion, achieving an OPM of 7.5%. Sun care orders are expected to expand as unit price negotiations have stabilized, paving the way for sustained growth.
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United States: The US segment continues its exceptional trajectory with a 210% YoY rise in sales to 21.7 billion won and a noticeable improvement in operating profit to 1.5 billion won. The US market is buoyed by strong orders and new product lines, specifically in base makeup, achieving profitable operations for the second consecutive quarter with an OPM of 6.9%.
Earnings and Valuation Outlook
Kolmar Korea's stock is experiencing positive momentum driven by sun care demand and US market expansion. The sun care sector is witnessing robust orders due to peak seasonality, projecting record domestic margins in Q2. In the US, the planned completion of a second plant in June is boosting growth prospects. This expansion aligns with ongoing discussions with new clients for onshore production, spurred by recent tariff policies. As a result, we adjust the US revenue forecast from KRW 80 billion to KRW 90 billion for 2025.
Investment Recommendation
In light of the enhanced performance and favorable valuation, we are elevating our price target from KRW 92,000 to KRW 110,000. This revision is supported by higher operating margin estimates (25F domestic OPM of 12.5%) and revised industry multiples. Trading at 14x 12FM PER, Kolmar Korea's stock remains attractively priced. Our recommendation is to maintain a Buy position, given the strategic growth trajectory and operational efficiencies.
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This report illustrates Kolmar Korea's potential and reflects the broader market dynamics essential for strategic investment decisions.
