Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea has delivered an exceptional start to its 2025 fiscal with a significant earnings performance that caught the market by surprise. The company's first-quarter results reported revenues of KRW 653.1 billion, marking a 14% increase YoY, paired with a notable 85% YoY upturn in operating profit to KRW 59.9 billion. The robust financial vitality is reflective of the company’s strategic expansion and firm footprint in its core markets — Korea, China, and the US.
Domestic Breakthrough: The Rise of Indie Brands
On the home front, Kolmar Korea witnessed a promising surge in domestic sales, tallying KRW 274.3 billion, an 11% YoY elevation. The driver? A burgeoning demand for sun care products, particularly from indie brands outperforming the traditional legacy names. As these niche brands undergo rapid ascension, accounting for a more substantial share in the market — projected at 60% — the once-dominant legacy brands dwindle. With Q2 marking the sun care peak season, orders are on an upward trajectory, promising a fortification in Kolmar’s top-line growth. The improved product mix of sun care and hero SKUs has propelled operating margins to an impressive 12.4%, a peak for Q1 historical metrics.
China’s Resurgence
In China, previously seen struggles have shifted towards an unexpected positive. Sales surged by 20% YoY to KRW 41.6 billion, while operating profit leaped 72% YoY to KRW 3.1 billion, delineating an OPM of 7.5%. Last year’s challenges around unit price negotiations with major sun care clients have dissipated, leading to a rejuvenation in order volumes, a trend predicted to persist.
US Expansion
The United States market stands out with stellar growth: sales soared by 210% YoY to KRW 21.7 billion, complemented by a return to operating profitability at KRW 1.5 billion, inclusive of a QoQ uplift of KRW 300 million (OPM 6.9%). This has been attributed to vigorous order intake from pivotal clients and the onboarding of new base makeup customers. Kolmar US’s profitability aligns for the second quarter running, underscoring robust operational efficacy.
Attractive Valuation and Optimistic Outlook
Kolmar Korea’s shares garner strength from its strategic positioning in sun care and the favorable valuation milieu in the US. Suncare, characterized by high order volumes during peak seasons, fuels the domestic uplift towards potentially record margins in Q2. Additionally, the forthcoming June completion of their second US plant bolsters this positive outlook, paving the way for heightened production capabilities and increased engagement with brands seeking localization post-tariff adjustments.
Considering the thriving order dynamics from Plant 1 and anticipation around Plant 2, Kolmar Korea’s revised US revenue guidance for 2025 jumps from KRW 80 billion to KRW 90 billion. Consequently, we have adjusted our price target upward from KRW 92,000 to KRW 110,000, driven by elevated domestic OPM forecasts (12.5%) and favorable industry multiples.
The stock trades at a favorable 14x 12FM PER, continuing to present as a compelling buy.
Kolmar Korea exemplifies a strategic synthesis of market innovation and operational excellence, setting the stage for an encouraging full-year outlook in 2025.
