Title: Earnings Surprises Anticipated for Peak Season in Key Markets
1Q25 Review: Surpassing Expectations in Korea, China, and US
Kolmar Korea delivered impressive 1Q25 results, outperforming market expectations with revenue soaring to KRW 653.1 billion, a robust 14% increase year-over-year (YoY), complemented by a spectacular 85% YoY rise in operating profit, amounting to KRW 59.9 billion. The company's strategic operational focus and leverage across significant markets such as Korea, China, and the US have driven this success.
Domestic Market Dynamics:
In the domestic market, sales achieved KRW 274.3 billion, marking an 11% YoY growth. This surge was largely fueled by the booming sun care indie brands segment, which has significantly outperformed traditional legacy brands. As we approach the peak sun care season in Q2, an uptick in orders for key brands is anticipated. The strategic shift from legacy to indie brands will likely bolster top-line growth—currently, legacy brands comprise 10% of the market, down from 40%. An enhanced product mix in sun care and hero SKUs propelled the operating margin to 12.4%, the highest Q1 margin in company history.
Revitalized Growth in China:
China, previously underperforming, displayed a resurgence with sales of KRW 41.6 billion, a 20% YoY increase, and operating profit jumping by 72% YoY to KRW 3.1 billion, resulting in an operational margin of 7.5%. Despite last year’s drag due to unit price negotiations, this year promises renewed expansion in sun care orders, projecting sustained growth.
U.S. Market Momentum:
In the US, the market continued its high growth trajectory, with sales surging to KRW 21.7 billion, a staggering 210% YoY increase. Operating profit also turned positive with KRW 1.5 billion, boosting quarter-over-quarter (QoQ) performance by KRW 300 million, translating to an operational margin of 6.9%. Strong orders from key clients and the addition of new base makeup customers have solidified profitability, achieving noteworthy margins for a consecutive second quarter.
Investment Perspective:
The company's shares are buoyed by sun care momentum and appealing US valuations. With a thriving sun care order book, Q2 is expected to see unprecedented domestic margins. The strategic expansion in the U.S., with a second plant set to complete by June, amplifies potential growth. Engagements for onshore production post-tariff adjustments further enhance this outlook. Consequently, we've adjusted the 2025 U.S. revenue projection from KRW 80 billion to KRW 90 billion.
Reflecting these robust estimates (25F domestic OPM of 12.5%) and favorable industry valuations, we are elevating our price target to KRW 110,000 from KRW 92,000. Currently trading at 14x 12-month forward PER, this stock remains an attractive buy.
This format offers a comprehensive view of Kolmar Korea’s financial performance and market potential, making it an ideal addition to any bullish investment portfolio reflecting well-informed and actionable insights.
