[Edaily Reporter Shin Ha-yeon ] On the 29th, Shinhan Investment Securities projected that KOLMAR KOREA(161890)’s second-quarter earnings would exceed market expectations, driven by strong skincare exports from its Korean subsidiary and the profit leverage effect. The firm maintained its “Buy” rating and raised the target price from 123,000 won to 130,000 won.

Park Hyun-jin, a research analyst at Shinhan Investment Securities, stated, “Strong demand for skincare exports, led by the Korean subsidiary, is also boosting profit leverage,” adding, “In the second quarter, the Korean subsidiary is expected to see the profit leverage effect maximized due to increased sales.” He continued, “The base effect from the U.S. subsidiary is also expected to grow as the second half of the year progresses,” noting, “The company is expected to continue maintaining its investment appeal.”

KOLMAR KOREA’s second-quarter consolidated revenue is estimated at 843.9 billion won, with operating profit at 99.6 billion won. This represents year-over-year increases of 15% and 36%, respectively, and operating profit is expected to exceed the market consensus (93.1 billion won).

The improvement in earnings is expected to be led by the Korean subsidiary. Research Analyst Park analyzed, “By subsidiary, revenue growth rates are projected to be over +25% for Korea (standalone), +10% for China, around -10% for the U.S. and Canada, and +7% for HK inno.N Corporation, with the Korean subsidiary driving revenue growth,” adding, “As production of basic skincare products increases, primarily at the Korean manufacturing subsidiary, changes in the product mix are significantly contributing to profit improvement.” He added, “We expect the Korean subsidiary to achieve its highest-ever profit margin.”

He also projected that the performance of the Chinese and U.S. subsidiaries would gradually improve. “In China, revenue from new clients is expected to gain momentum, boosting the subsidiary’s contribution to second-quarter revenue,” he explained, adding, “We can also expect improved profitability at the Chinese subsidiary due to increased orders for suncare products.” He continued, “Although orders from the U.S. subsidiary’s former top client continue to decline, the rate of decline in performance is expected to slow,” adding, “We anticipate gradual performance improvement in the second half of the year as new clients are expected to be attracted to the second U.S. plant.”

He also cited the rising utilization rate of domestic production facilities as a positive factor. Research Analyst Park assessed, “We understand that, alongside increased coverage of new indie clients, the company is responding smoothly to export demand in new categories,” adding, “Strong growth led by the Korean subsidiary is expected to continue.”

Regarding the target stock price, he noted, “We have raised our net income forecast by more than 5% by revising upward our estimates for South Korea’s operating profit and company-wide non-operating income,” and added, “We are raising the target price to 130,000 won while maintaining a target price-to-earnings ratio (PER) of 17 times.”