Earnings Surprises Anticipated for the Peak Season
Analyzing Q1 2025 Results: Kolmar Korea Shines in Korea, China, and the US
In recent financial performance reviews, Kolmar Korea has notably exceeded market projections for the first quarter of 2025. The company reported revenues soaring to KRW 653.1 billion, a 14% increase year-on-year, with an exceptional operating profit of KRW 59.9 billion, an impressive 85% rise compared to the previous year. This growth, attributed to substantial operating leverage, spanned across key regions including Korea, China, and the United States.
Regional Performance Highlights:
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Korean Market:
Domestic sales reached KRW 274.3 billion, marking an 11% increase from last year. The surge was driven by robust performance in the indie sun care brand segment, which substantially outpaced legacy brands. It's anticipated that the legacy brands' contribution could shrink to 10%, relinquishing their former dominance at 40%, thereby strengthening top-line growth in the peak sun care season. Consequently, the operating margin peaked at a record-high of 12.4% for Q1. -
China Market:
China's underperformance in previous quarters was offset by surprising results this period, with sales registering at KRW 41.6 billion, translating to a 20% year-on-year increase. Operating profits grew to KRW 3.1 billion, a stupendous 72% uptick, culminating in an operating profit margin of 7.5%. Renewed sun care orders are expected following the resolution of prior unit pricing issues, promising continued sales momentum. -
US Market:
The US segment sustained its growth trajectory, with an astronomical 210% increase in sales amounting to 21.7 billion won. The operating profit soared, with quarterly gains amounting to 1.5 billion won, representing a 300 million won quarter-over-quarter improvement, settling the operating margin at 6.9%. Key customer orders, especially for new products, bolstered this growth, supplemented by the acquisition of new base makeup clientele.
Investment Outlook:
Kolmar Korea's stock is buoyed by sun care demand and US valuation. Anticipating further growth, the company is on track to achieve unparalleled domestic margins in the subsequent quarter. With completion of a second US plant projected by June, discussions for onshore productions in light of new tariff policies indicate solid future contracts. Consequently, anticipated US revenue guidance for 2025 has been revised upward from KRW 80 billion to KRW 90 billion.
Reflecting these enhanced estimates (anticipating a domestic operating profit margin of 12.5% in 2025) and improved industry valuation multiples, we've accordingly raised the price target to KRW 110,000 from KRW 92,000. With the stock currently trading at an affordable 14x 12-month forward price-to-earnings ratio, a 'Buy' rating remains in force.
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