Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's first quarter performance in 2025 has set a new benchmark for outperformance, outstripping market forecasts with a remarkable revenue stream of KRW 653.1 billion—a robust 14% year-on-year growth. Operating profit soared to KRW 59.9 billion, marking an 85% growth from the previous year. This impressive feat highlights significant operating leverage and business expansion across major regions, including Korea, China, and the United States.
Domestic Market Dynamics: Strength in Indie Brands
The domestic market contributed KRW 274.3 billion, up by 11% year-on-year. This growth is mainly attributed to the surging popularity of sun care indie brands, which are outperforming compared to legacy labels. As we approach the peak season for sun care, the influx of orders is expected to further propel top-line growth. Currently, indie brands are on track to constitute a larger portion of sales, anticipated to reach 40% compared to legacy brands shrinking to 10%. The strategic product mix, especially in sun care and key SKUs, drove operating margins to an unprecedented 12.4%—our strongest in a first quarter to date.
China: Rebounding and Expanding
China posted outstanding results with sales amounting to KRW 41.6 billion, a 20% jump year-on-year. Operating profit skyrocketed by 72% to reach KRW 3.1 billion, anchored by a 7.5% operating profit margin. Sun care orders are experiencing a revival post last year’s hurdles, where negotiation issues curbed growth. The forecast for 2025 is optimistic with continued expansion expected.
US Market: Consistent Growth and Profitability
Across the Atlantic, the U.S. market mirrored an impressive growth pace, with sales surging by 210% year-on-year to KRW 21.7 billion. Operating profits showed substantial improvement, positioned on a positive trajectory for two consecutive quarters. Notably, operating profit grew by KRW 300 million quarter-on-quarter, achieving a 6.9% operating margin. This success is fueled by an influx of orders from primary customers, alongside the acquisition of new base makeup clientele.
Investment Outlook: Strong Earnings and Attractive Valuation
Kolmar Korea’s stock trajectory is supported by favorable momentum in the sun care segment and valuation prospects in the U.S. market. The company is projected to achieve record domestic margins in Q2. On the U.S. front, the impending completion of the second plant in June, coupled with the strategic shift to onshore production assisted by tariff adjustments, positions Kolmar Korea for elevated growth. Consequently, our U.S. revenue guidance for 2025 has been elevated from KRW 80 billion to KRW 90 billion.
In light of these developments and higher projections—especially a 12.5% domestic operating profit margin for 2025—we are revising our price target from KRW 92,000 to KRW 110,000. The stock, currently valued at 14x the 12-month forward price-to-earnings ratio, represents an attractive buying opportunity.
Portfolio Summary: Kolmar Korea in BULLINK
- Execution Excellence: Surpassed market expectations significantly
- Revenue Growth: Achieved 14% YoY
- Operating Leverage: Displayed 85% YoY growth in profits
- Regional Insights:
- Korean Market: Indie sun care brands spearhead growth, reaching KRW 274.3 billion
- China: Sales rebounding with a 20% increase; profit surge by 72%
- US Market: Continued robust growth; KRW 21.7 billion in sales (+210% YoY)
- Strategic Advancements:
- Completion of the second U.S. plant poised to expand production scale.
- Investment Theses:
- Upgraded Revenue Guidance: From KRW 80 billion to KRW 90 billion in U.S. markets.
- Price Target Increase: Adjusted to KRW 110,000, considering higher valuation multiples.
- Current Valuation: Persists as a buy at an attractive 14x 12FM PER.
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