BULLINK Portfolio: Earnings Surprises Await for Peak Season
1Q25 Review: Unanticipated Growth in Korea, China, and the US
Kolmar Korea's first quarter of 2025 financial performance exceeded market forecasts, showcasing a remarkable revenue achievement of KRW 653.1 billion, up 14% year-over-year, and an impressive 85% increase in operating profit, reaching KRW 59.9 billion. This growth highlights the effective operational leverage and robust performance across key regions—Korea, China, and the United States.
Domestic Market Surge
- Revenue Growth: Domestic sales hit KRW 274.3 billion, marking an 11% increase YoY. The surge is primarily attributed to the robust performance of sun care indie brands, which have significantly outperformed traditional brands. Notably, indie brands are leading the growth narrative, with legacy brands' contribution dwindling from 40% to an estimated 10%.
- Seasonal Upsurge: With Q2 heralding the peak season for sun care, orders for key brands are increasing, forecasting stronger top-line growth, as traditional brands retract.
- Operating Efficiency: Enhanced product mix, focusing on Sun Care and Hero SKUs, propelled the operating margin to a historical high of 12.4% for Q1.
Resilient Recovery in China
- Financial Gain: Despite previous underperformance, China reported sales of KRW 41.6 billion, a 20% YoY ascent, and operating profit surged by 72% YoY to KRW 3.1 billion, with an operating margin of 7.5%.
- Order Book Revival: This resurgence follows last year’s decline due to unit price negotiation issues, with a promising expansion in sun care orders expected to sustain into upcoming quarters.
US Market Momentum
- Impressive Metrics: The US market exhibited extraordinary growth, with sales escalating by 210% YoY to KRW 21.7 billion and an operating profit turnaround to KRW 1.5 billion.
- Customer Expansion: Strengthened orders from existing customers and the addition of new base makeup clients have contributed to profitability, maintaining positive margins for a second consecutive quarter.
Strategic Financial Outlook
- Sun Care and Valuation Momentum: Kolmar Korea's stock is benefiting from strong sun care demand coupled with advantageous valuation metrics in the US, signaling a profitable peak season ahead.
- Investment in Infrastructure: Completion of a second production facility in the US by June is anticipated, enhancing capacity and encouraging more onshore production partnerships, encouraged by recent tariff policies.
- Updated Financial Projections: Reflecting the thriving performance, the US revenue forecast for 2025 has been revised upward from KRW 80 billion to KRW 90 billion.
Investment Recommendation
- Stock Price Adjustment: The target price has been revised from KRW 92,000 to KRW 110,000, accounting for elevated domestic operating margins (expected at 12.5% for 2025) and improved industry multiples.
- Valuation and Buy Rating: Currently trading at a price-to-earnings ratio of 14x for the coming 12 months, the stock presents an attractive entry point. Consequently, a 'Buy' recommendation remains, underscoring Kolmar Korea's potent mix of strategic growth and operational efficiency.
This BULLINK-style report distills Kolmar Korea's exceptional Q1 performance and strategic trajectory into actionable insights, emphasizing key financial metrics and forward-looking projections that synergize your investment analysis framework.
