Shinhan Investment securities said on the 29th that Kolmar Korea is seeing stronger export demand for skincare centered on its Korea subsidiary, boosting profit leverage. It maintained its "buy" (BUY) rating and raised its target price to 130,000 won from 123,000 won. The previous trading day's closing price was 90,700 won.
Shinhan Investment securities projected that in the second quarter this year, Kolmar Korea's sales on a consolidation basis will be 843.9 billion won and operating profit 99.6 billion won, up 15% and 36%, respectively, from a year earlier. That is above the consensus operating profit of 93.1 billion won.
Park Hyun-jin, an analyst at Shinhan Investment securities, said, "As production of basic cosmetics products centered on the Korea production subsidiary increases, changes through the product mix will make a major contribution to profit improvement," adding, "The Korea subsidiary is expected to achieve a record-high profit margin."
Park projected that, in the second quarter this year versus a year earlier, domestic category sales will keep sun care around 40% of the mix and production of basic cosmetics will increase by 55%.
Park said, "In China, sales will increase in the second quarter this year as revenue centered on new clients ramps up, and profitability at the China subsidiary from increased sun care orders is also expected," adding, "At the U.S. subsidiary, orders from the No. 1 client appear likely to keep declining, but the magnitude of the earnings decline will ease."
Park added, "In the second half this year, inflows of new clients to the second U.S. plant are also expected, so a gradual improvement in results will occur."