Earnings Surprises Await for Peak Season: A Bullink Portfolio Analysis
1Q25 Review: Korea, China, and US Market Surprises
In a remarkable turn of events, Kolmar Korea has reported significantly better-than-expected results for the first quarter of 2025. This comprehensive review explores the key factors driving their success across major markets, namely Korea, China, and the United States.
Korean Market Performance
Kolmar Korea's domestic performance was robust, with total sales reported at KRW 274.3 billion, marking an impressive 11% year-over-year increase. Notably, this growth has been driven by the strong performance of indie brands in the sun care segment. These indie brands have shown exceptional growth, even as legacy brands face a decline, capturing only 10% of the market compared to a previous 40% share. The sun care segment is poised for further growth as we enter the peak season in Q2, contributing to improved top-line growth and an impressive operating margin of 12.4%—the highest first-quarter margin to date.
China's Revival
Despite facing challenges in previous fiscal periods, Kolmar Korea's performance in the Chinese market has seen a resurgence. Sales from China surged to KRW 41.6 billion, with an outstanding 20% year-over-year growth. Operating profit in China also experienced a significant uptick, reaching KRW 3.1 billion, a 72% increase YoY, with an operating profit margin (OPM) of 7.5%. The sun care segment, which had faced setbacks last year due to pricing negotiations, is now witnessing a robust increase in orders—a trend expected to persist.
US Market Momentum
The U.S. market continued its upward trajectory, recording sales of KRW 21.7 billion, a staggering 210% YoY growth. Operating profit also turned positive, with a sequential increase of KRW 300 million to reach an OPM of 6.9%. The addition of new base makeup customers and strong orders from existing clients have significantly boosted profitability for the second consecutive quarter.
Investment Insight: Attractive Earnings and Valuation
Kolmar Korea's stock is gaining momentum due to its thriving sun care segment and favorable valuation in the U.S market. With a robust order book poised for the Q2 peak season and record domestic margins on the horizon, the company is well-positioned for sustained growth. Furthermore, the impending completion of a second production plant in the U.S. by June promises to bolster revenue. Projections indicate an increase in U.S. revenue guidance for 2025, from KRW 80 billion to KRW 90 billion.
In response to these advancements, the price target has been revised from KRW 92,000 to KRW 110,000, reflecting improved domestic OPM estimates of 12.5% and higher industry multiples. Currently trading at a multiple of 14x 12FM PER, the stock remains a compelling buy.
This Bullink portfolio analysis underscores the strategic growth and valuation opportunities for investors, suggesting Kolmar Korea is well-positioned to capitalize on market conditions and drive shareholder value.
