Bullink Portfolio Report: Unveiling Surprises in the Peak Season
1Q25 Review: Unexpected Gains in Korea, China, and the US
Kolmar Korea's Performance Snapshot
Kolmar Korea has announced a remarkable financial quarter that stunned market analysts, with revenue reaching KRW 653.1 billion, marking a 14% year-over-year (YoY) increase. The company reported an impressive operating profit of KRW 59.9 billion, an 85% surge YoY, showcasing its operational prowess and strong market presence in Korea, China, and the United States.
Domestic Success Driven by Sun Care Boom
In Korea, Kolmar Korea's domestic sales hit KRW 274.3 billion, an 11% increase YoY. This growth was majorly fueled by the surging popularity of sun care indie brands, which are increasingly outperforming traditional legacy brands. As we transition into Q2, the peak season for sun care, there is a noticeable uptick in orders for these key brands. Notably, as legacy brands shrink (expected to be around 10% compared to the previous 40%), the anticipated top-line growth is poised to strengthen. The strategic blend of improved sun care products and hero SKUs has propelled the operating margin to a record 12.4% for Q1.
China's Rebound in Sales and Profit
In China, a region that has struggled in recent history, unexpected robust results were recorded. Sales escalated to KRW 41.6 billion, a 20% YoY increase, while operating profit catapulted by 72% YoY to KRW 3.1 billion, achieving an operating profit margin of 7.5%. Previous setbacks, mainly due to unit price negotiation issues affecting sun care orders, are now in the rearview, with expectations of sustained growth in sun care orders.
US Market: A Hub of Sales Acceleration
The US market continues to shine brightly with high sales growth and profitability improvements, showing sales of KRW 21.7 billion, a remarkable 210% YoY increase. Operating profit turned positive with a quarter-over-quarter improvement of KRW 300 million, reaching an OPM of 6.9%. The market is buoyed by strong orders from key customers, new product launches, and newly acquired base makeup clients, signaling profitability on a substantial scale for the second consecutive quarter.
Valuation and Market Prospects: Placing a Premium on Growth
The momentum in sun care alongside strategic valuation efforts in the US are powering Kolmar Korea’s stock dynamics. With the peak season fostering a robust order pipeline in sun care, forecasted record margins domestically for Q2 seem promising. Anticipation grows around the completion of a second US plant in June, with active discussions ongoing regarding new potential clients for onshore production post-amendment of tariff policies. In light of current orders and trends in both plants, our projections for 2025 US revenue are being revised upwards from KRW 80 billion to KRW 90 billion.
This optimism around growth metrics prompts an increase in Kolmar Korea’s price target to KRW 110,000 from an earlier KRW 92,000, corresponding to enhanced earnings estimates (25F domestic OPM of 12.5%) and recalibrated industry valuation multiples. Presently trading at a relatively modest 14x forward P/E ratio, the stock offers an attractive investment proposition, and we maintain our 'Buy' stance.
Note: The information presented in this report is derived from accessible market data and company disclosures as of 1Q25 and should be leveraged for strategic investment decisions.
