BULLINK Portfolio Analysis: Kolmar Korea Q1 2025 Review
Sector Performance Overview
As the peak season approaches, the market braces for potential earnings surprises, particularly within the skincare and cosmetics sector. This report takes a detailed look at Kolmar Korea's resounding performance across its key markets – Korea, China, and the US – and forecasts continued momentum.
Korea: Dominance in Sun Care
Kolmar Korea reported an impressive first-quarter outcome, with revenues surging to KRW 653.1 billion, marking a substantial 14% year-on-year increase, and operating profits soaring by 85% YoY to KRW 59.9 billion. The domestic market remains a stronghold, with sales touching KRW 274.3 billion (+11% YoY), driven by the flourishing sun care indie brands. Notably, these indie brands are outpacing market growth, contrasting with the decline in traditional legacy brands. As Q2 kicks off, the sun care segment is poised for even greater top-line expansion, potentially redefining the sales landscape with estimates predicting legacy brands will only constitute a 10% share compared to their previous 40%. The revamped SKU mix has pushed operating margins to an unprecedented 12.4%.
China: Unexpected Resurgence
China's market performance defied previous stagnation, clocking in sales of KRW 41.6 billion (+20% YoY) and a drastic improvement in operating profit to KRW 3.1 billion (+72% YoY, OPM 7.5%). This resurgence is attributed to renewed sun care orders following resolution in unit price negotiations, indicating sustained growth prospects.
US: Steep Growth Trajectory
The US market showed spectacular growth, with sales skyrocketing by 210% to KRW 21.7 billion and achieving a positive operating profit of KRW 1.5 billion (an increase of KRW 300 million QoQ, OPM 6.9%). Robust orders from primary clients, alongside acquisitions of new base makeup customers, underscore a continuing trend of profitability for the second successive quarter.
Valuation and Forward-Looking Insights
Kolmar Korea’s promising sun care segment and strategic US market initiatives underline its robust valuation. Domestically, peak season sales are set to achieve record margins in Q2. The anticipated completion of a second US plant by June, coupled with ongoing negotiations with several brands driven by favorable tariff policy shifts, underpins our upward revision of the 2025 US revenue forecast from KRW 80 billion to KRW 90 billion.
Owing to these enhanced financial projections, we have elevated the stock’s price target to KRW 110,000 from KRW 92,000, reflecting revised domestic operating profit margins (12.5%) and heightened industry valuation multiples. Trading at a forward P/E ratio of 14x over the next 12 months, the stock presents an economical entry point. Our BUY recommendation stands firm.
This BULLINK Portfolio Analysis encapsulates Kolmar Korea's dynamic market maneuvers and growth prospects, offering insightful recommendations for stakeholders and investors keen on leveraging market movements during the peak season.
