BULLINK Portfolio Report: Earnings Surprises Await for Peak Season
1Q25 Review: Unexpected Growth Across Key Markets
Kolmar Korea's Performance Shocks Analysts
In the first quarter of 2025, Kolmar Korea has astonished market analysts with an impressive earnings performance. The company reported a revenue of KRW 653.1 billion, marking a significant year-over-year (YoY) increase of 14%, alongside a remarkable 85% YoY surge in operating profit, reaching KRW 59.9 billion. This growth is attributed to robust operational leverage and expansion across major regions, including Korea, China, and the United States.
Market Dynamics and Strategic Wins
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Domestic Success: Domestically, Kolmar Korea saw its sales rise to KRW 274.3 billion (+11% YoY), driven by the booming demand in sun care indie brands. These brands have outperformed legacy brands, which are experiencing a decline, leading to a strategic realignment within the company's portfolio. With Q2 being a peak season for sun care, the expectation is for further enhancements in top-line growth. The shift in product mix towards improved Sun Care and Hero SKUs has been pivotal, delivering a record Q1 operating margin of 12.4%.
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China's Rebound: In China, previously a lagging market, the company experienced an unexpected rebound. Sales in the region grew by 20% YoY to KRW 41.6 billion, and operating profit rose by 72% YoY to KRW 3.1 billion. The operating profit margin (OPM) stood at 7.5%, with Sun Care orders making a comeback after last year's challenges with unit price negotiations.
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US Expansion: The US market continued its impressive performance with an outstanding sales increase of 210% YoY, totaling 21.7 billion won. Operating profits also turned positive with a YoY increase of 1.5 billion won. The addition of new base makeup customers has fortified orders, enhancing profitability for the second consecutive quarter with a notable OPM of 6.9%.
Positive Earnings and Valuation Outlook
Kolmar Korea's stock is enjoying a dual-lift from strong sun care momentum and valuation gains in the US market. The ongoing sun care peak season propels domestic margins to new heights in Q2. Strategically, the completion of a second plant in the US by June, alongside active negotiations for onshore production after tariff changes, positions Kolmar Korea for further revenue expansion. The US revenue guidance has been revised upwards to KRW 90 billion for 2025 from an initial KRW 80 billion.
Investment Thesis and Recommendations
Given these dynamics, Kolmar Korea's price target is being revised upwards from KRW 92,000 to KRW 110,000. This reflects enhanced domestic operation margin forecasts (25F domestic OPM at 12.5%) and positive industry valuation multiples. The current stock pricing at 14x 12FM PER presents an attractive investment opportunity. We maintain our recommendation to Buy.
Data Source: Generated insights and projections based on market performance data up to October 2023.
