BULLINK Portfolio Update: Earnings Surprises Await for Peak Season
1Q25 Review: Earnings Beat Expectations Across Key Markets
Kolmar Korea has kicked off 2025 with a robust financial performance, eclipsing market forecasts in 1Q25. The company recorded revenues of KRW 653.1 billion, a 14% increase from the previous year, with operating profits soaring by 85% to KRW 59.9 billion. This growth is driven by strong performances across major markets: Korea, China, and the US.
Domestic Market Dynamics
In Korea, domestic sales stood at KRW 274.3 billion, reflecting an 11% year-on-year growth driven by a surge in demand for sun care indie brands. These brands are outperforming legacy products, which now only account for an estimated 10% of total sales down from 40%. As Q2 approaches—the peak season for sun care products—order volumes are expected to climb, enhancing top-line growth and reinforcing operating margins. The improved product mix has pushed the operating margin to a new high of 12.4% for Q1.
China's Unexpected Upside
In China, despite historical underperformance, Kolmar posted sales of KRW 41.6 billion, marking a 20% YoY rise, with operating profits up by 72% to KRW 3.1 billion. Key to this turnaround was the resolution of unit price negotiations, which has revived sun care product orders. This trend is anticipated to sustain, bolstering future earnings potential.
Rapid Expansion in the US
The US segment stands out with dramatic sales growth of 210% YoY, reaching KRW 21.7 billion, and an operating profit of KRW 1.5 billion. This success is attributed to robust orders from key clients and the acquisition of new base makeup customers. Profitability is on an upward trajectory, with margins improving steadily for a second consecutive quarter.
Valuation and Strategic Outlook
Kolmar Korea’s stock is buoyed by dual engines of growth: the booming sun care market and enhancing valuations in the US. The US operations are anticipated to further capitalize on these trends with the opening of a second plant in June. This expansion is likely to attract additional clients, especially with the onshore production becoming more appealing post-tariff reforms. Consequently, the 2025 US revenue forecast has been revised upwards from KRW 80 billion to KRW 90 billion.
We have adjusted our price target to KRW 110,000 from KRW 92,000 to reflect these optimistic projections, inclusive of a 12.5% upward revision in domestic operating margin forecasts. Trading at 14x 12-month forward PE ratio, the stock remains a compelling buy.
Market Insights and Strategic Implications:
For investors focusing on the cosmetic industry, Kolmar Korea offers a compelling growth narrative powered by strategic optimization and market responsiveness. The robust financial metrics and thoughtful capacity expansions underpin a strong foundation for sustainable profitability. As sun care seasonality peaks, coupled with strategic US manufacturing expansions, stakeholders are poised to capture significant value from this dynamic enterprise.
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