Surging 73% in a Month, But "Still More Upside"... Kolmar Korea's 'Record-Breaking Results' Signal Bright Third Quarter [This Week's Column]

From 93,000 to 161,000 Won in July and August
28% Jump on Record-Breaking Q2 Results
Target Price Raised to 200,000 Won... "Growth Momentum"

Kolmar Korea, a domestic cosmetics Original Development Manufacturing (ODM) company, achieved its highest-ever quarterly results during the second quarter, the peak season for sun care products. On the day the results were announced, its share price surged by 28%. Between July and August alone, the stock rose by 73.5%. Although the third quarter is not typically a high season, brokerages in Yeouido predict even better results than in the second quarter, citing increasing global demand. Some analysts have even suggested a target share price of 200,000 won for Kolmar Korea, riding the wave of the 'K-beauty' boom.

Kolmar Korea operates its business as an ODM supplier, delivering cosmetics manufactured with its proprietary research and technology to client companies. It also has subsidiaries in other sectors, including Yonwoo, which handles the packaging segment, and HK inno.N, which specializes in pharmaceuticals and health & beauty (H&B) businesses. Among Kolmar Korea’s cosmetics clients are Atomy, Gudai Global, and CJ Olive Young in cosmetics, and LG Household & Health Care and Amorepacific in packaging. The pharmaceutical segment includes the K-CAB brand, while Condition and Hutgae Water are prominent H&B products.

Share Price Soars 73%... Only ODM Firm with 40% Foreign Ownership

Kolmar Korea’s share price soared by 73.5% in just one month on a closing-price basis. On July 30, the price stood at 93,200 won, but by August 28, it had reached a record high of 161,700 won. On this peak day, the stock jumped by 10.91% (15,900 won) from the previous trading session amid optimism regarding industry-wide performance for cosmetics. As of September 7, the closing price stood at 144,000 won, down from the peak but still elevated.

The notable point is the foreign ownership ratio for Kolmar Korea. As of September 6, foreign ownership reached 40.73%, higher than other cosmetics ODM companies. Foreign holdings in Cosmax stood at 35.74%, and Cosmecca Korea at 24.97%. During the July 30 to August 28 period, foreign investors, alongside institutional investors, contributed significantly to the share price rally exceeding 70%. Foreign investors made net purchases totaling 21,494,045,550 won during this period, while institutions net bought 40,145,610,950 won and individuals net sold 58,890,747,300 won.

This trend is analyzed as a concentration of interest in Kolmar Korea, the industry leader, amid growing attention towards domestic ODM companies. Kolmar Korea’s market capitalization is about 3.25 trillion won, while Cosmax’s stands at 2.95 trillion won, and Cosmecca Korea’s at 1.35 trillion won. Kolmar Korea also outperformed the other two companies in second-quarter results. The consolidated operating margin for Kolmar Korea in the second quarter was 12.81%, compared to Cosmecca Korea’s 11.5% and Cosmax’s 6.82%.

Second Quarter 'Sun Care Peak Season'... Third Quarter Also Driven by Global Demand 

Kolmar Korea achieved its highest-ever quarterly performance in the second quarter. On a consolidated basis, second-quarter sales were 861.3 billion won, and operating profit was 110.3 billion won, marking year-on-year increases of 17.8% and 50.2%, respectively. By affiliate, Kolmar Korea’s standalone entity saw a sales increase of 31%, China 16%, the USA -3%, Canada -8%, Yonwoo +29%, and HK inno.N +2%. The Korean entity and packaging subsidiary Yonwoo were key drivers of growth. Beating market expectations, the share price surged 28.12% on the day results were announced last month.

Domestic sales reached 430.4 billion won (+31.2% year-on-year) and operating profit was 70.8 billion won (+44.4%), both all-time quarterly records. The second quarter saw strong growth mainly in sun care, capitalizing on the peak season. For Kolmar Korea’s domestic operations, skincare accounted for 49% of sales, sun care for 35%, and makeup for 12%. The sun care segment’s share of sales reached an all-time high. Yonwoo also posted improved results on the back of increased pump container orders for sun care and skincare products.

Third-quarter earnings are expected to be driven by continued growth in skincare sales. Some securities firms even project that results for the domestic entity will surpass those of the second quarter. SK Securities forecasts that domestic sales will reach 432 billion won, a 34.16% year-on-year increase. Operating profit is forecast at 68 billion won, with an operating margin of 15.7%. The slight decrease from the second quarter margin is attributed to a declining proportion of high-margin sun care products in the third quarter, as well as increased overtime costs to compensate for fewer working days compared to the previous quarter.

Kyobo Securities also projects third-quarter domestic revenue of 430.4 billion won, surpassing the second quarter, and operating profit of 65.9 billion won with an operating margin of 11.2%. Kyobo Securities analyst Kwon Woojung noted, "There is continued expansion in global exports for scale-up brands and increases in orders from global multinational corporations (MNCs). Therefore, despite fewer working days in the third quarter, sales are expected to remain steady or even grow compared to the previous quarter. Moreover, as regional and client diversification continues, the seasonality effect of sun care is being gradually diluted, which is encouraging."

Brokerages Raise Target Prices in Succession... Some Set at 200,000 Won

Securities firms in Yeouido are rapidly raising their target prices for Kolmar Korea. LS Securities raised its target price last month to 200,000 won (a 66.67% increase from before). BNK Investment & Securities (175,000 won), Samsung Securities and Hyundai Motor Securities (170,000 won each), and Hanwha Investment & Securities (160,000 won) have also raised their targets. SK Securities followed this month with an increase to 180,000 won (+5.88%).

SK Securities analyst Hyeong Kwon-hoon stated, "We have been successfully managing production projects for luxury brands of global MNCs since the end of last year. The decision by global luxury brands to outsource production demonstrates that Korean cosmetics ODMs are achieving recognition on the global stage, serving as a key reference for securing additional orders from other global brands." He added, "With just the anticipated increase in orders from existing global MNC clients, we estimate a 2–3% rise in sales for the standalone entity next year. Additionally, as new projects are highly likely to be launched next year, both domestic and global brand-related sales are expected to add meaningful growth momentum."

The export boom across the cosmetics industry is also supporting prospects for continued earnings growth. Last month's cumulative export amount surged by 1.67 billion US dollars year-on-year, showing a sharp increase compared to the 680 million US dollars during the same period last year. By region, Europe and the US accounted for 70% of the export growth.

This content was produced with the assistance of AI translation services.