BULLINK Portfolio Report: Earnings Surprises Await for Peak Season
Overview: 1Q25 Review – Exceptional Performance Across Regions
In the latest earnings season, Kolmar Korea has delivered a remarkably strong performance, surpassing market expectations. The company reported revenues of KRW 653.1 billion, reflecting a 14% year-on-year growth, alongside an impressive 85% increase in operating profit to KRW 59.9 billion. This robust performance was driven by substantial growth and enhanced operating leverage across its key markets, including Korea, China, and the US.
Highlights by Region:
1. Korea: Dominance through Indie Brands
Domestic sales rose to KRW 274.3 billion, marking an 11% year-on-year increase. This growth was primarily driven by the rising popularity of sun care indie brands, which are outpacing traditional legacy products. The indie brands have captured significant market attention, supporting our projection for strengthened top-line growth, despite the contraction of legacy brands, which we estimate to reduce to 10% from 40%. Enhanced product mix in sun care and Hero SKUs propelled operating margins to a record 12.4% for the first quarter.
Example:
The surge in indie brand sales mirrors trends seen in the previous financial cycle, where niche brand expansion led to doubled market penetration within key demographic segments.
2. China: Rebounding Strength
China, previously a challenging market, posted unexpectedly strong results with a 20% year-on-year increase in sales, reaching KRW 41.6 billion. Operating profits also surged by 72% to KRW 3.1 billion. This rebound can be attributed to resolving prior unit price negotiations, resulting in a reinvigoration of sun care orders which we anticipate will sustain growth momentum.
Example:
The resurgence in China's sun care segment is reminiscent of the early 2020s when consumer confidence rebounded rapidly following policy adjustments.
3. United States: Unprecedented Growth Trajectory
The US operations continue to shine with a remarkable 210% increase in sales to KRW 21.7 billion and a significant boost in operating profit. The addition of new base makeup customers and strengthening relations with key clients are pivotal. The completion of a second plant by June is expected to further propel US revenue from KRW 80 billion to KRW 90 billion for the current financial year.
Example:
This trajectory echoes the early success of multinational expansions in the late 2010s, where strategic onshore production boosted both sales and profitability by mitigating tariff impacts.
Valuation and Strategic Outlook:
The stock is riding on the dual momentum of a flourishing sun care portfolio and favorable US market dynamics—both contributing positively to the company's valuation. With the peak season ahead, we anticipate record domestic margins for Q2. The completion of the second plant in the US opens further revenue streams and potential new brand partnerships.
Adjusting our targets, we raise the price target to KRW 110,000 from KRW 92,000 based on enhanced domestic operating margin projections and industry valuation multiples. Currently trading at 14x 12-month Forward Price Earnings Ratio, Kolar Korea represents a compelling buy opportunity, maintaining our positive stance.
Conclusion:
Kolmar Korea's strategic positioning in key global markets, combined with its agile adaptation to consumer trends, positions it optimally for sustained growth. Investors should observe forthcoming quarterly reports closely, as they could reflect even higher growth trajectories, especially with ongoing global economic revivals.
Disclaimer: The above analysis is for informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence before making investment decisions.
