Earnings Surprises Await for Peak Season: Bullink Portfolio Analysis
1Q25 Review: Korea, China, and US Surprises
Kolmar Korea's First Quarter Breakthrough
Kolmar Korea has reported a remarkably strong Q1 for 2025, significantly surpassing market expectations. The company's revenue reached KRW 653.1 billion, marking a 14% increase year-over-year (YoY), while operating profit skyrocketed by 85% YoY to KRW 59.9 billion. This growth trajectory is reflected across all major business regions including Korea, China, and the US, showcasing impressive operating leverage.
Domestic Performance and Strategic Expansion
Domestic sales in Korea climbed to KRW 274.3 billion, a growth of 11% YoY. This upward trend is predominantly driven by the robust performance of sun care indie brands, which are emerging as major contributors amidst the decline of traditional legacy brands. As we step into Q2, traditionally the peak season for sun care products, increased orders from key brands indicate strengthened top-line growth. We anticipate domestic operating margins to improve significantly, with legacy brands expected to contract from 40% to 10%, thereby optimizing product mix and contributing to a record Q1 margin of 12.4%.
Recovery and Expansion in China
Despite previous underperformance, China has shown an unexpected recovery with sales rising to KRW 41.6 billion, up 20% YoY, and operating profit jumping 72% YoY to KRW 3.1 billion, with an operating profit margin (OPM) of 7.5%. The resurgence in demand is largely attributed to a resolution in prior sun care order negotiations with major partners. Continued growth in this sector is foreseeable.
US Market: A Growth Powerhouse
The US market continues to outperform, showing an impressive sales hike of 210% YoY, amounting to 21.7 billion won. Operating profit also saw positive growth, with a quarter-over-quarter increase of 300 million won, achieving an OPM of 6.9%. The addition of new base makeup customers, coupled with a strong demand for new products from key clients, is supporting sustained profitability for the second consecutive quarter.
Investment Outlook: Earnings and Valuation Insight
Market Momentum and Strategic Advantages
Kolmar Korea's stock is gaining traction, propelled by its sun care sector’s positive momentum and promising valuation in the US market. Q2 is projected to deliver record domestic margins. The impending completion of the second US plant in June is set to bolster capacity, alongside ongoing negotiations with brands interested in onshore manufacturing, fueled by tariff policy adjustments. Consequently, we are revising our 2025 US revenue projection upwards, from KRW 80 billion to KRW 90 billion.
Valuation and Recommendation
In response to the upward earnings revision (with a forecasted domestic OPM of 12.5% for FY 25) and favorable industry valuation multiples, we have increased our price target from KRW 92,000 to KRW 110,000. Trading at 14x its 12-month forward price-to-earnings ratio, the stock remains attractively priced. We maintain a 'Buy' recommendation based on these projections.
This BULLINK portfolio analysis provides a comprehensive insight into Kolmar Korea's unexpected Q1 performance, reflecting robust multi-regional growth and strategic market positioning. The analysis highlights their operational improvements and optimistically revised targets, positioning investors well for upcoming peak season opportunities.
