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BULLINK Portfolio: Strategic Growth and Market Opportunities
Earnings Surprises Await: Navigating Peak Season with Kolmar Korea's Strategic Expansion
Quarterly Insights: 1Q25 Performance Review
Kolmar Korea has successfully beaten market anticipations this first quarter of 2025. Notable financial highlights include an impressive revenue of KRW 653.1 billion, marking a 14% year-over-year (YoY) increase, and an operating profit of KRW 59.9 billion, an extraordinary 85% YoY surge. This robust performance is attributed to significant operational leverage across pivotal markets such as Korea, China, and the US.
Domestic Market Dynamics
In Korea, domestic sales have reached KRW 274.3 billion, reflecting an 11% YoY growth primarily driven by the burgeoning indie sun care brands. These indie brands are eclipsing their legacy counterparts, which are experiencing a decline. With Q2 marking the sun care peak season, an uptick in orders for key brands is anticipated. The strategic mix of Sun Care and Hero SKUs has propelled the operating margin to 12.4%, marking the strongest margin for Q1 on record.
China's Unanticipated Rally
China's market, previously underperforming, has delivered surprisingly strong results with sales increasing by 20% YoY to KRW 41.6 billion and an operating profit up by 72% YoY, achieving an operating profit margin of 7.5%. Despite last year’s challenges with unit price negotiations, the outlook is optimistic for renewed sun care orders, projecting sustained expansion.
US Market Expansion and Profit Enhancement
A remarkable 210% YoY sales growth was noted in the US, amounting to 21.7 billion won, alongside a sustained profitability trend, supported by a QoQ operating profit increase of 300 million won. New product offerings and client acquisitions are fortifying profitability, sustaining positive operating margins for the second successive quarter.
Earnings and Valuation: A Promising Outlook
Kolmar Korea's stock gains momentum from sun care demand and US market valuation, both indicating strong upwards potential. Anticipated record margins in Q2, coupled with a forthcoming second production plant in June, amplify this optimism. The new plant, post-tariff policy, is already engaging with several onshore production discussions, setting a conducive path for further revenue growth. Consequently, the US revenue guidance for 2025 has been revised up from KRW 80 billion to KRW 90 billion.
Aligning with these optimistic forecasts, our price target rises to KRW 110,000, up from KRW 92,000, taking into account heightened 25F domestic OPM of 12.5% and favorable industry multiples. Trading at an affordable 14x 12FM PER, we maintain our 'Buy' recommendation, urging investors to leverage this opportunity.
In Conclusion:
Kolmar Korea stands poised for strategic growth, driven by market-specific successes and expanding production capabilities. Investors are encouraged to capitalize on these converging factors, indicative of strengthened financial positioning and market presence.
The article indeed portrays a strategic picture of Kolmar Korea, emphasizing their tangible growth while underscoring market opportunities aligned with planned expansions—a portfolio well worth attention.
