BULLINK Portfolio Report: Unveiling Opportunities in the Upcoming Earnings Season
Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Deliver Unexpected Performance
In a remarkable turn of events, Kolmar Korea has outperformed market expectations with their 1Q25 results. The company posted an impressive revenue of KRW 653.1 billion, marking a 14% increase year-over-year (YoY), while operating profit soared by 85% YoY, reaching KRW 59.9 billion. This robust performance highlights the company's adeptness at harnessing growth and operational leverage across key markets, particularly Korea, China, and the United States.
Korea: A Sunlit Success Story
Dominating the domestic market, Kolmar Korea reported sales of KRW 274.3 billion, an 11% uptick YoY. This growth is largely attributed to the burgeoning appeal of sun care indie brands, which have outpaced legacy brands. With Q2 being the peak season for sun care products, an influx of orders for key brands is anticipated, promising further top-line augmentation. This strategic shift in product mix has propelled operating margins to a record high of 12.4% in Q1.
Example in Context: Just as Samsung Electronics leverages its semiconductor innovation to dominate the global tech space, Kolmar Korea harnesses niche sun care markets to bolster its domestic standing.
China: An Unforeseen Upswing
China, previously a laggard, reported an unexpected surge in performance with sales jumping by 20% YoY to KRW 41.6 billion, and operating profit shooting up by 72% YoY to KRW 3.1 billion (OPM 7.5%). This rebound is largely driven by a recovery in sun care orders, following last year's challenges with pricing negotiations. The surge in demand is poised to persist, bolstering long-term growth prospects.
United States: A Stalwart of Growth and Profitability
The U.S. market continues to be a beacon of high growth, with sales tripling (210% YoY) to KRW 21.7 billion and operating profit turning positive at KRW 1.5 billion. Key customer orders, alongside newly secured base makeup clients, underpin this sustained success. With profitability improving for the second sequential quarter, the foundation for sustainable growth is being firmly established.
Insight: Kolmar’s U.S. strategy echoes Tesla’s approach of geographic and product portfolio diversification to mitigate regional market headwinds.
Earnings and Valuation: On the Upswing
Kolmar Korea is poised as a formidable player driven by sun care momentum and favorable U.S. valuations. The sun care division is experiencing unprecedented order volumes, promising record margins in Q2. The forthcoming completion of the second U.S. plant in June, alongside active customer negotiations, signals further expansion. Consequently, we have revised our U.S. revenue guidance for 2025 upwards to KRW90 billion.
Reflecting these upgraded projections (25F domestic OPM of 12.5%) and improved valuations driven by industry multiples, our price target has been adjusted to KRW110,000, climbing from KRW92,000. The stock’s current valuation at 14x 12FM PER is deemed affordable, reinforcing our 'Buy' recommendation.
Conclusion: As Kolmar Korea navigates through an encouraging earnings season, their strategic pivot towards high-margin products and strategic geographic expansions provides compelling upside potential for investors.
BULLINK Insight: Leveraging growth in niche markets, akin to strategies employed by global tech giants, positions Kolmar Korea as a resilient entity poised for future profitability and expansion.
