Bullink Portfolio Overview: Kolmar Korea 1Q25 Performance
Earnings Surprises Await for Peak Season
Kolmar Korea Surprises in 1Q25
Kolmar Korea has exceeded market expectations in its first quarter of 2025 with strong financial results. Their revenue reached KRW 653.1 billion, marking a 14% year-over-year growth, and their operating profit skyrocketed by 85% YoY to KRW 59.9 billion. This impressive performance was achieved across major regions including Korea, China, and the US, demonstrating robust growth and operational efficiency.
Domestic Market Dynamics
- Revenue Growth: Domestic sales reached KRW 274.3 billion, a substantial 11% increase compared to the previous year. This growth was largely attributed to the rising demand for sun care indie brands, which outpaced the legacy brands.
- Seasonal Surge: With Q2 being the peak season for sun care products, orders for key brands are increasing. As legacy brands decline, comprising approximately 10% of the portfolio as opposed to 40%, topline growth is expected to further accelerate.
- Improved Margins: The optimized mix of Sun Care and Hero SKUs resulted in an operating margin of 12.4%, the strongest Q1 margin ever recorded by Kolmar Korea.
China Market Revival
- Sales and Profit Surge: Sales in China posted a robust 20% YoY increase, reaching KRW 41.6 billion, while operating profit surged 72% YoY to KRW 3.1 billion with an OPM of 7.5%.
- Order Recovery: After a sluggish performance last year due to unit price negotiations, sun care orders from major Chinese customers are on the rise again, indicating a positive outlook for the coming quarters.
US Market Momentum
- Exponential Growth: The US region reported a remarkable sales growth of 210% YoY to 21.7 billion won, with operating profit turning positive and improving by 300 million won QoQ, achieving an OPM of 6.9%.
- Expansion and Profitability: Orders remain strong from key customers, supplemented by the acquisition of new base makeup clients. Profitability trends are positive, with the US market demonstrating meaningful margins for the second consecutive quarter.
Investment Appeal: Momentum and Valuation
- Sun Care Demand: With a strong order book aligned with peak sun care season, domestic margins are anticipated to hit record levels in Q2.
- US Expansion: The completion of Kolmar Korea’s second plant in June will cater to confirmed and potential clients, especially in the context of onshore production under new tariff policies.
- Valuation Upside: Reflecting these factors, the 25-year US revenue guidance has been uplifted from KRW 80 billion to KRW 90 billion. The target price is adjusted upwards to KRW 110,000 from KRW 92,000, supported by a 25F domestic OPM prediction of 12.5% and favorable industry multiples.
Kolmar Korea currently trades at 14x 12FM PER, making it an attractive investment opportunity. The "Buy" recommendation remains in effect, leveraged by positive momentum in the sun care segment and promising future valuations.
This report underscores the breakthrough performance and strategic positioning of Kolmar Korea in the competitive cosmetics industry, pointing towards a sustained trajectory of growth and profitability.
