BULLINK Portfolio Report: Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's Exceptional Performance Shatters Expectations
Kolmar Korea has reported robust 1Q25 results that have outstripped market forecasts, achieving revenue of KRW 653.1 billion (+14% YoY) and operating profit of KRW 59.9 billion (+85% YoY). The company has demonstrated significant growth and operational leverage across its principal markets, including Korea, China, and the US.
Key Highlights and Market Dynamics
Domestic Sales Surge:
- Domestic sales recorded KRW 274.3 billion, climbing 11% YoY, significantly driven by the rising demand for sun care indie brands.
- As the peak season for sun care products approaches, orders are ramping up. Notably, indie brands are outperforming legacy competitors, whose market share is anticipated to dwindle from 40% to an estimated 10%.
China's Turnaround:
- After a year of sluggish growth due to pricing disputes, Kolmar's operations in China rebounded with sales hitting KRW 41.6 billion (+20% YoY) and operating profit reaching KRW 3.1 billion (+72% YoY, OPM 7.5%).
- The recovery is fueled by reinvigorated sun care orders, expected to persist moving forward.
U.S. Growth and New Ventures:
- The US market continued its remarkable growth trajectory, with sales surging by 210% YoY to KRW 21.7 billion, accompanied by a positive operating profit of KRW 1.5 billion (OPM 6.9%).
- The order book remains strong, bolstered by acquisitions of new base makeup clients and a diversified portfolio that includes state-of-the-art products.
Strategic Outlook and Valuation
Momentum in Sun Care and U.S. Plant Expansion:
- The sun care sector continues to gain momentum, with expectations for record domestic margins in Q2.
- The upcoming completion of Kolmar's second U.S. plant in June is pivotal, aimed at meeting rising demand and capitalizing on favorable tariff policies, projecting a 25-year U.S. revenue growth adjustment from KRW 80 billion to KRW 90 billion.
Revised Guidance and Investment Potential:
- Reflecting improved domestic operating margins (25F domestic OPM of 12.5%) and enhanced valuation metrics, Kolmar’s price target is raised to KRW 110,000 from the previous KRW 92,000.
- Currently trading at a 14x 12FM PER, Kolmar’s stock presents an attractive value proposition in the evolving industry landscape. The recommendation to Buy remains steadfast.
Kolmar Korea's capacity to surpass earnings expectations is a testament to its strategic positioning and innovative edge in the competitive sun care and beauty landscape. Investors are encouraged to consider the substantial growth opportunities presented as the company navigates its impressive market trajectory across major regions.
