Kyobo Securities said that despite weakness in legacy brands, growth in indie brands is driving earnings improvement at Kolmar Korea. It also projected that the trend of industry recovery will continue as overseas expansion in regions such as China and Europe proceeds.
It maintained a "Buy" rating and a target price of 100,000 won. Kolmar Korea's previous session closing price was 76,100 won.
Kyobo Securities forecast Kolmar Korea's first-quarter revenue this year at 714.2 billion won and operating profit at 67.7 billion won. Those figures are up 9.4% and 12.9%, respectively, from a year earlier.
By segment, the Korea subsidiary is expected to lead earnings growth. Kyobo Securities projected the Korea subsidiary's first-quarter revenue at 330 billion won, up 21% on-year, and operating profit at 45.5 billion won, up 34%.
Kwon Woo-jung, an analyst at Kyobo Securities, said, "Despite weakness in legacy brands centered on door-to-door sales and home shopping, indie brand sales are rising quickly." Kwon added, "This year, the negative impact of legacy brands appears limited, so growth at the Korea subsidiary should be positive."
In particular, with the No. 1 client remaining solid, an expansion of retailers' private-label brands, a recovery in inbound demand, and rising sales of multi-balm products are expected to support results.
Growth at the China subsidiary is also expected to continue. Kyobo Securities estimated China revenue at 45 billion won, up 8% on-year, and operating profit at 3.2 billion won. Analyst Kwon said, "Orders from existing clients are generally increasing, and the yuan's strength should keep revenue solid."
However, the U.S. subsidiary was cited as a drag on results. Kyobo Securities projected the U.S. subsidiary's revenue at 8 billion won, down 63% on-year, and an operating loss of 6 billion won, swinging to the red.
Kwon said, "The impact of reduced orders from the former largest client continues," adding, "A meaningful inflow of new clients is expected to begin in the second half."