Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Unveil Promising Results
Kolmar Korea's Stunning Performance:
Kolmar Korea's first-quarter results for 2025 have outstripped market expectations, marking a significant surge in both revenue and operating profit. The company's revenue reached KRW 653.1 billion, reflecting a 14% year-over-year increase, while its operating profit soared by 85% year-on-year to KRW 59.9 billion. This impressive growth is driven by strategic advancements and operating leverage across crucial markets — Korea, China, and the U.S.
Domestic Assertiveness through Indie Brands:
Domestically, Kolmar Korea's sales jumped to KRW 274.3 billion, an 11% increase year-over-year, fueled by the burgeoning popularity of sun care indie brands. These emerging brands are outperforming legacy brands, which are on the decline. As Q2 ushers in the peak sun care season, order volumes are on the rise for key brands. Notably, indie brands are capturing increased market share, which we anticipate will enhance top-line growth as they replace legacy brands. Our analysis indicates a shift from a 40% reliance on legacy brands to merely 10%. Improved Sun Care and optimized Hero SKU mix have propelled the operating margin to a record 12.4%.
Rebounding Chinese Market:
China has made a remarkable comeback with sales swelling to KRW 41.6 billion, a 20% increase year-on-year, and operating profit climbing 72% to KRW 3.1 billion, achieving a 7.5% operating margin. This resurgence is attributed to eased unit price negotiations compared to last year, fostering an expected expansion in sun care orders. This trend is anticipated to sustain moving forward.
U.S. Growth Momentum:
In the U.S., Kolmar Korea continues to demonstrate robust sales growth with an impressive 210% year-on-year increase, reaching KRW 21.7 billion in sales. Operating profit has turned positive with a quarter-on-quarter improvement of KRW 300 million, achieving a 6.9% operating margin. Strong order books at major customers, coupled with securing new base makeup clients, underscore this positive trajectory. Profitability is on an upward swing for the second successive quarter, with notable margins.
Strategic Earnings and Valuation Insights
Riding the Sun Care and U.S. Valuation Wave:
Kolmar Korea's stock performance is benefiting significantly from the momentum in sun care orders and valuation enhancements in the U.S. market. The sun care sector, in particular, is poised for record domestic margins in the second quarter. Anticipating the completion of the second U.S. plant in June, Kolmar Korea is actively negotiating with multiple brands for onshore production, following recent tariff policy adjustments. Consequently, we have upgraded our 2025 U.S. revenue guidance from KRW 80 billion to KRW 90 billion reflecting these promising developments.
Revised Price Target and Investment Recommendation:
Our revised price target is now KRW 110,000, up from KRW 92,000, to accommodate increased forecasts (with a 12.5% domestic operating margin forecast for 2025) and favorable valuation metrics (industry multiples). Trading at an affordable 14x 12-month forward PER, we maintain a 'Buy' recommendation.
For readers seeking to capitalize on emerging market opportunities and robust stock valuations, Kolmar Korea presents an attractive proposition in the ever-evolving skincare sector. This portfolio report highlights the synergistic potential of strategic market positioning, operational excellence, and timely investments in infrastructure.
