BULLINK Portfolio Report: Kolmar Korea's Earnings Surprises and Implication Insights
Overview of Earnings Surprises for Q1 2025: Korea, China, and US
In an impressive display of financial prowess, Kolmar Korea has outperformed market expectations in Q1 2025, reporting a revenue of KRW 653.1 billion, marking an impressive 14% year-over-year (YoY) increase, while the operating profit saw an exceptional growth of 85% YoY reaching KRW 59.9 billion. This surge in financial performance is observed across key markets such as Korea, China, and the United States, each contributing uniquely to the company's robust earnings profile.
Key Revenue Drivers: Domestic and International Markets
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Korea: The domestic market accounted for KRW 274.3 billion of total sales, representing an 11% YoY rise. This growth is primarily attributed to the burgeoning indie sun care brands, which are outperforming traditional legacy brands. As the peak sun care season unfolds in Q2, we anticipate strengthened top-line growth with operational margin enhancements driven by the improved product mix.
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China: Despite prior struggles, China showcased a vital resurgence. Revenue reached KRW 41.6 billion, driven by a 20% YoY increase, with operating profits surging by 72%. The anticipated expansion in sun care orders signifies sustained growth in the forthcoming quarters.
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United States: Demonstrating remarkable expansion, US sales skyrocketed by 210% YoY to KRW 21.7 billion. This growth trajectory is bolstered by robust orders from pivotal customers and securing new base makeup customers. Operational profitability is set to gain continual momentum as the new plant's completion is on schedule by June.
Strategic Evaluation and Future Outlook
Kolmar Korea's strategic focus on diversifying regional market dependencies is proving efficient, with an anticipated completion of the second US plant, augmenting revenue potential. In light of confirmed orders and promising discussions with numerous brands post-tariff adjustments, the company has adjusted its US revenue guidance for 2025 upwards from KRW 80 billion to KRW 90 billion.
Valuation and Market Position
Kolmar Korea's stock remains undervalued, trading at a 14x 12FM Price Earnings Ratio (PER). This offers a compelling opportunity for investors as the company is poised for further expansion in the second quarter, backed by domestic operational efficiency and international market penetration, particularly in the US.
Investment Recommendation
Our revised price target for Kolmar Korea is set at KRW 110,000, up from KRW 92,000. We reaffirm our ‘Buy’ stance, factoring in the elevated domestic and international operational margins and favorable sun care market dynamics during the peak season.
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