Certainly! Below is the adapted stock analysis report in my usual portfolio style, integrating pertinent examples and informative details.
Kolmar Korea: Earnings Surprises Await for Peak Season
1Q25 Performance: Korea, China, and US Surge
Korea:
Kolmar Korea has delivered an impressive 1Q25, with results outstripping market expectations: Revenue reached KRW 653.1 billion, marking a 14% year-over-year (YoY) increase, alongside a remarkable 85% YoY surge in operating profit to KRW 59.9 billion. This strong performance was driven by strategic growth across key markets: Korea, China, and the US.
In the domestic market, sales climbed to KRW 274.3 billion, reflecting an 11% YoY rise, largely fueled by the robust performance of sun care indie brands. These indie brands are excelling, capturing market share from legacy brands, whose dominance is gradually waning. While legacy brands have declined to comprise about 10% of sales compared to 40% historically, Q2's peak sun care season is buoying new orders. This transition is enhancing top-line growth. Notably, improved Hero SKU and Sun Care product mix pushed operating margins to a record 12.4% for Q1.
China:
China’s market, previously lagging, reported an unexpected upswing with sales of KRW 41.6 billion—a 20% YoY increase—and an impressive boost in operating profit by 72% YoY to KRW 3.1 billion (OPM 7.5%). The sun care segment, previously hindered by pricing disputes, is witnessing a resurgence in customer orders, a trend anticipated to continue into subsequent periods.
United States:
The US operations exhibited vigorous sales growth, posting KRW 21.7 billion, a staggering 210% YoY leap, and turning profitable with a 6.9% operating margin. The addition of new base makeup customers and robust order flow from key clients, fuelled by innovative product offerings, underpins this performance. Profitability has sustained momentum for the second consecutive quarter.
Valuation and Earnings Outlook:
Kolmar Korea stock is injected with vigor from both sun care's growth trajectory and the burgeoning opportunities in the US market. Domestically, the anticipation of peak Q2 margins adds to the positive outlook. In the US, the impending completion of their second manufacturing plant in June is pivotal. Engagements with multiple brands targeting onshore production post-tariff policy adjustments highlight significant future revenue potential.
Given the strong order pipeline for Plant 1 and anticipated output from Plant 2, Kolmar Korea has adjusted its 2025 US revenue forecast upwards to KRW 90 billion from KRW 80 billion. Reflecting these enhancements in its performance forecasts (FY25 domestic OPM predicted at 12.5%) and market multiples, we are revising our price target to KRW 110,000 from KRW 92,000. The stock is attractively priced at 14x 12-month forward price-to-earnings ratio (12FM PER), endorsing our continued ‘Buy’ recommendation.
Conclusion:
Kolmar Korea demonstrates robust market adaptability and effective strategic positioning across global markets, making it a compelling choice for investors aiming to capitalize on its consistent growth and operational advancements. As the sun care niche thrives, the diversified expansion into domains like the US solidifies its growth narrative for the foreseeable future.
