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BULLINK Portfolio Report: Kolmar Korea's Earnings Surprises Amidst Global Expansion
1Q25 Review: Surprising Results in Korea, China, and the US
Kolmar Korea has taken the spotlight with its impressive 1Q25 financial outcome, surpassing market expectations through robust revenue growth and surging operating profits. The company's revenue hit KRW 653.1 billion, marking an admirable 14% YoY increase, coupled with an 85% surge in operating profit, rounding off at KRW 59.9 billion. This upward trajectory showcases significant growth and operational leverage across its major markets, namely Korea, China, and the US.
Domestic Market: Leading with Indie Brands
Kolmar Korea's domestic market performance remains strong, with sales climbing to KRW 274.3 billion, illustrating an impressive 11% YoY growth. This surge was powered by the rise of sun care indie brands, which have outshone traditional brand growth as legacy products recede. Currently, Q2 stands as the pinnacle for sun care demand, with expectations for enhanced top-line growth as legacy products, predicted to shrink to 10% of the portfolio, decline from their former 40% stature. This strategic shift in product mix, focusing on improved sun care and Hero SKUs, propelled the operating margin to an unprecedented 12.4%—a record for Q1.
China: A Resurgence in Demand
Contrary to last year's underperformance, China's market story is one of unexpected strength. Here, Kolmar Korea achieved sales of KRW 41.6 billion, a remarkable 20% YoY upturn, and an operating profit leap of 72% YoY to KRW 3.1 billion, achieving an operating profit margin of 7.5%. Previous hiccups with sun care orders, stemming from unit price negotiations, have been addressed, with forecasts showing continued order expansion.
US Market: Sustained Momentum
The US market has shown an impressive upswing, with sales skyrocketing by 210% YoY to 21.7 billion won. Operating profit turned positive, with a quarter-over-quarter increase of 300 million won, hitting an operating profit margin of 6.9%. This success is attributed to strong orders from key clients and new product launches, combined with the addition of new base makeup clientele. The US market's profitability streak is expected to persist.
Investing in Growth and Value
Kolmar Korea's share price is buoyed by the dynamic sun care sector and the robust valuation in the US market. Both of these propel optimism. The suncare sector anticipates a record-breaking order book in Q2, pointing towards unprecedented domestic margins. In the US, the imminent completion of a second plant in June is a pivotal development. We are engaged in promising discussions with various brands for onshore manufacturing post-tariff policy changes. Reflecting these strategic advancements, we have elevated our 25-year US revenue forecast from KRW 80 billion to KRW 90 billion.
In light of these developments, we have increased our price target from KRW 92,000 to KRW 110,000, driven by heightened earnings estimates (25F domestic OPM of 12.5%) and favorable industry multiples. The stock currently stands at a 14x 12FM PER, offering an attractive entry point. Our recommendation remains a firm "Buy."
This BULLINK report showcases our insightful analysis and aligns robust investment strategies with Kolmar Korea's evolving positioning in the global market. For a deeper venture into this landscape, stay informed with BULLINK.
In this BULLINK adaptation, the focus on highlighting performance metrics, market expectations, and strategic investment advice is maintained, while the presentation is tailored to engage and inform savvy investors and stakeholders effectively.
