[Edaily Reporter Shin Ha-yeon ] On the 21st, Shinhan Investment Securities projected that KOLMAR KOREA(161890)would continue its robust growth in the third quarter, driven by an expansion of its client base among K-Beauty indie brands and improvements in its revenue structure centered on high-priced products. The firm assessed that while strong growth at the domestic subsidiary is driving earnings, the recovery of overseas subsidiaries will be key to future stock price gains. It maintained its “Buy” rating and target price of 153,000 won.

Park Hyun-jin, an analyst at Shinhan Investment Securities, stated in a report released today, “We believe the company is successfully expanding its coverage of new indie clients—primarily in the skincare segment—while simultaneously meeting export demand in new categories,” adding, “In the third quarter, the Korean subsidiary is expected to see a pronounced profit leverage effect driven by revenue growth.”

KOLMAR KOREA’s third-quarter consolidated revenue is estimated at 849 billion won, up 24.3% year-over-year, while operating profit is projected to rise 54.4% to 90 billion won. The operating profit margin is expected to reach 10.6%, a 2.1 percentage point increase from the same period last year. These figures are generally in line with the market consensus of 836 billion won in revenue and 91.9 billion won in operating profit.

The domestic subsidiary is at the heart of this earnings growth. Revenue for the Korean subsidiary is projected to increase by more than 30% year-over-year, with operating profit also expected to rise by over 40%. Analysts attribute this improvement in profitability to expanded production of skincare products—including sunscreen—and a shift in the sales mix toward higher-priced items.

Analyst Park explained, “As production of basic cosmetics, including sunscreen, increases, profits are improving through changes in the product mix,” adding, “Consequently, the Korean subsidiary’s operating profit is expected to grow by more than 40%, similar to the previous quarter.” He also predicted that Yeonwoo, a subsidiary that manufactures cosmetic packaging, would have expanded its contribution to profitability.

The estimated revenue breakdown by product category for the domestic subsidiary is in the 30% range for sun care and the 50% range for skin care. In particular, the fact that the company has secured indie brand clients with a high proportion of overseas exports was cited as a positive factor.

However, the analyst noted that it is necessary to assess whether some sales may have been delayed due to tight supply of cosmetic containers. Analyst Park pointed out, “We need to verify later whether there are any sales delays resulting from the recent tight supply of containers.”

It was anticipated that it would take time for overseas subsidiaries to recover their performance. While the Chinese subsidiary’s profitability is improving due to increased orders for sun care products, offsetting the cost burden resulting from expanded sales of color cosmetics, its revenue growth rate is projected to remain within 10%.

The U.S. subsidiary is expected to maintain sales at the same level as the same period last year or see a slight decline. Analyst Park assessed, “While this is a period when base effects could come into play for the U.S. subsidiary, we judge that its potential for a structural earnings recovery remains somewhat limited.”

Annual performance is also expected to continue its upward trend. Shinhan Investment Securities projected KOLMAR KOREA’s consolidated revenue for this year at 3.2282 trillion won and operating profit at 348.6 billion won. These figures represent year-over-year increases of 18.6% and 45.5%, respectively. For next year, revenue and operating profit are forecast at 3.6613 trillion won and 424.7 billion won, respectively.

The target price of 153,000 won was calculated by applying a price-to-earnings ratio (PER) of 16 times based on 12-month forward earnings. This represents an upside potential of 20.4% compared to the closing price of 127,100 won on the 20th.

Analyst Park noted, “It will take time for the U.S. and Chinese subsidiaries to recover their earnings,” but added, “Momentum centered on the South Korean subsidiary continues to gain traction.” He further predicted that improvements in the overseas subsidiaries’ earnings would serve as a catalyst for future stock price gains.