BULLINK Portfolio: Earnings Surprises in Strategic Markets – A Comprehensive Analysis
1Q25 Review: Upsurge in Key Regions – Korea, China, and US
In a striking display of operational acumen, Kolmar Korea has reported results for 1Q25 that have positively surprised the market. The company achieved a revenue milestone of KRW 653.1 billion, marking a robust 14% growth year-over-year, while its operating profit reached KRW 59.9 billion, an impressive 85% increase YoY. This performance was steered by strategic growth and improved operating leverage in pivotal markets such as Korea, China, and the United States.
Korea – Domestic Market Flourishes
The domestic market witnessed a surging revenue of KRW 274.3 billion, an 11% increase YoY, primarily bolstered by the burgeoning sun care indie brands. These indie brands are leading a paradigm shift, outperforming legacy counterparts, which have seen a decline. As the sun care market gears up for its peak season in Q2, order volumes for key brands are on the rise. This evolution in product mix has driven the operating margin to an unprecedented 12.4% for Q1.
China – Revival with a Vengeance
Despite historical underperformance, the Chinese market reported unexpected vigor with sales soaring to KRW 41.6 billion—up 20% YoY—and an operating profit of KRW 3.1 billion, reflecting a 72% YoY growth and an operating margin of 7.5%. Last year’s challenges, including unit price negotiations weighing down on placements, have seen a reversal with renewed sun care order expansion anticipated to persist.
United States – Pursuing Record Growth
The US market continued its trajectory of remarkable sales expansion with revenue climbing by 210% YoY to KRW 21.7 billion, accompanied by a positive operating profit trajectory. New base makeup customers and product lines have strengthened orders from key accounts. The sustained profitability for consecutive quarters has recorded a significant operating margin of 6.9%, testament to the market’s buoyant health.
Investment Thesis: Buoyant Growth and Strategic Valuation
Kolmar’s stock momentum is underpinned by the dual engines of sun care demand and strategic valuations in the US. With the sun care sector experiencing heightened demand amid peak seasonal orders, domestic margins for Q2 are predicted to reach record highs. The upcoming completion of the second US plant in June adds further allure, with confirmed customer engagements and ongoing dialogues with various brands seeking onshore production following tariff policy shifts. Consequently, the US revenue forecast for 2025 has been upwardly revised from KRW80 billion to KRW90 billion.
In response to these upgraded financial prospects, the price target has been elevated to KRW110,000 from KRW92,000, showcasing higher estimates (25F domestic OPM of 12.5%) and a fortified valuation within industry multiples. Trading at a compelling 14x 12-month forward PE ratio, Kolmar remains a buy recommendation.
Conclusion
Kolmar Korea's adept navigation through market dynamics, alongside its strategic market expansions in Korea, China, and the US, signals a promising outlook. Investors should earmark this momentum-driven stock, with anticipated strategic enhancements poised to yield sustained growth and robust returns.
