SK Securities said on the 7th that Kolmar Korea(161890) has secured additional medium- to long-term growth momentum on the back of industry strength and increased orders from global multinational corporations (MNCs). It maintained a "buy" (BUY) rating and raised its target price to 180,000 won from 170,000 won. The previous session's closing price was 145,800 won.
Hyeong Gwon-hun of SK Securities said, "Even though the peak season for sun care in cosmetics original design manufacturing (ODM) is the second quarter, standalone revenue in the third quarter will surpass the second quarter on the back of strong skincare sales," and added, "Rather than growth in new SKUs (number of items), revenue is increasing on volume (Q) growth of existing SKUs, creating an operating leverage effect."
According to SK Securities, Kolmar Korea Co.'s domestic subsidiary revenue in the third quarter of this year is expected to increase 34% on-year, driving overall earnings growth. In July–August, Korea's cosmetics exports also showed a trend surpassing the second-quarter average.
As for the five fewer working days than in the second quarter, the company said it can respond through productivity improvements from replacing aging equipment and some additional shifts. The third-quarter operating margin was projected at 15.7%, slightly down from the second quarter, reflecting a lower share of high-margin sun care products and additional labor costs.
The expansion of orders for global brands was also cited as a medium- to long-term re-rating factor. Analyst Hyeong said, "The company successfully carried out a production project for luxury brand products of a global MNC client, and using this as a reference, the number of SKUs for the brand and the number of global clients are expected to increase next year," adding, "Even the expected increase in volume next year from the top global MNC client alone will be a growth driver of about 2%–3% for standalone revenue."