Earnings Surprises Await for Peak Season
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's Stellar Performance: A Bullish Quarter
Kolmar Korea stunned the market with its 1Q25 results, showcasing an impressive trajectory through robust revenue gains and substantial operating profit increases. The company reported a revenue of KRW 653.1 billion, representing a 14% year-over-year increase, alongside an operating profit leap of 85% YoY to KRW 59.9 billion. This remarkable performance highlights strong growth and operating leverage across major territories, notably Korea, China, and the US.
Domestic Surge: Riding the Sun Care Wave
In Korea, domestic sales soared to KRW 274.3 billion, marking an 11% YoY growth. This surge is primarily attributed to the dynamic performance of sun care indie brands, which have significantly outpaced the declining legacy brand segment. As we approach Q2, the peak season for sun care, a notable uptick in orders for these key indie brands is anticipated. We project continued top-line growth as legacy brands diminish, currently estimated at 10% compared to a past 40% footprint. The enhanced mix of Sun Care and Hero SKUs propelled operating margins to an unprecedented Q1 high of 12.4%.
China's Resurgence: An Unexpected Upside
China, previously underperforming, delivered a pleasant surprise with sales reaching KRW 41.6 billion, a 20% YoY increase, and operating profit climbing 72% YoY to KRW 3.1 billion (OPM 7.5%). The prior year's sun care order slowdown due to unit price negotiations has been reversed, with expectations of sustained order expansions moving forward.
US Market Growth: A Continued Success Story
The US market continues to exhibit robust sales growth and profit improvements, recording sales of KRW 21.7 billion (+210% YoY) and operating profit of KRW 1.5 billion, indicating a positive YoY shift and a QoQ rise of KRW 300 million (OPM 6.9%). Strengthened orders from key customers, including new product lines and newly secured base makeup clients, reflect sustained profitability and a meaningful margin footprint for the second consecutive quarter.
Investment Outlook: A Promising Trajectory
Kolmar Korea's stock is buoyed by the dual momentum in sun care and an increasingly favorable valuation outlook in the US. Suncare enjoys a robust order book aligned with the peak season, positioning the company for record domestic margins in Q2. The second US plant, projected for June completion, promises to elevate production capabilities, enhancing engagement with brands post-tariff policy adaptation. Consequently, we've revised our 25-year U.S. revenue guidance upwards from KRW 80 billion to KRW 90 billion.
Reflecting these bullish estimations and improved valuation metrics (industry multiples with a 25F domestic OPM of 12.5%), we are elevating our price target from KRW 92,000 to KRW 110,000. With the stock trading at an attractive 14x 12FM PER, we maintain our Buy recommendation.
This report signifies the aggregation of Kolmar Korea's strategic foresight and execution prowess, resonating well with our BULLINK portfolio ethos: data-driven, future-ready, and geared towards sustainable growth avenues.
