[Edaily Reporter Shin Ha-yeon ] On the 9th, SKSecurities assessed that while KOLMAR KOREA(161890)’s third-quarter consolidated operating profit fell short of market expectations, the growth momentum of its domestic cosmetics Original Design Manufacturing (ODM) business remains robust. The firm analyzed that, given the domestic standalone subsidiary’s record-high quarterly revenue driven by the K-Beauty export boom and the expected expansion of overseas demand next year, the recent stock price decline should be viewed as a medium- to long-term buying opportunity. The firm maintained its “Buy” rating but lowered the target price from 180,000 won to 150,000 won.

Hyung Kwon-hoon, an analyst at SKSecurities, explained in a report released today, “While KOLMAR KOREA’s standalone subsidiary posted its highest-ever quarterly revenue due to the K-Beauty export boom, the profitability of its cosmetics subsidiary was lower than expected, and HK inno.N Corporation’s performance was also weaker than anticipated due to adjustments in K-Cap shipments and increased advertising expenses.”

KOLMAR KOREA’s third-quarter consolidated revenue totaled 828.2 billion won, a 21% increase year-over-year. Operating profit rose 40% to 81.9 billion won but fell short of both the market forecast of 91.9 billion won and SKSecurities’ estimate of 96.0 billion won. The operating profit margin stood at 9.9%.

In contrast, the domestic standalone subsidiary continued its strong growth momentum. Third-quarter standalone revenue reached approximately 434 billion won, marking the highest quarterly performance in the company’s history. Operating profit stood at 62.9 billion won, a 42% increase year-over-year, though it fell slightly short of SKSecurities’ forecast of 66.7 billion won.

The revenue share of its flagship sun care products expanded by 4 percentage points year-over-year despite the seasonal off-peak period, and skincare sales also showed strong growth, driving overall revenue growth.

However, the standalone operating profit margin fell by 1.9 percentage points from the previous quarter to 15%. Factors weighing on profitability included a decrease in operating days, an increase in the revenue share of makeup products, and the recognition of a 2 billion won provision for inventory valuation.

Analyst Hyung commented, “Despite seasonal factors, the revenue share of our flagship sun care products increased by 4 percentage points year-over-year, and driven by strong growth in skincare sales, the company recorded its highest-ever revenue in the third quarter.”

The firm projected that the strong growth trend of the domestic standalone subsidiary would continue into the fourth quarter. SKSecurities forecast fourth-quarter standalone revenue of 383.8 billion won—a 38% year-over-year increase—and operating profit of 40 billion won, up 79%.

Uncertainty regarding next year’s business conditions and concerns over insufficient production capacity were cited as the reasons behind the recent slump in the stock prices of cosmetics ODM companies. While the K-Beauty export boom continues, analysts note that the market is placing greater emphasis on the possibility of growth slowing next year rather than this year’s favorable business conditions.

Researcher Hyung stated, “The stock prices of cosmetics ODM companies have been on a downward trend since September. We believe the market is placing greater emphasis on the uncertainty surrounding next year’s business conditions rather than this year’s strong performance, and is also reflecting concerns about a shortage of production capacity (CAPA) in the first half of next year.”

However, SKSecurities forecast that the growth trend of K-Beauty will continue into next year. It projected the growth rate of K-Beauty exports (excluding China) to reach 27.5% by 2027 and gave a positive assessment of KOLMAR KOREA’s earnings growth potential.

The firm also believes that the production capacity shortage issue can be addressed. KOLMAR KOREA is expected to handle the increasing orders through outsourced production and the utilization of idle space within its existing factory premises until the completion of its new Sejong plant in the second half of next year.

SKSecurities estimated KOLMAR KOREA’s consolidated revenue for this year at 3.213 trillion won and operating profit at 328 billion won. These figures represent year-over-year increases of 18% and 37%, respectively. For next year, the firm projected revenue of 3.62 trillion won and operating profit of 399 billion won, representing growth of 12.7% and 21.7%, respectively.

The target price was lowered to 150,000 won to reflect the recent decline in price-to-earnings ratios (P/E ratios) among peer companies. However, this still represents an upside potential of 37.7% compared to the closing price of 108,900 won on the 6th.

Analyst Hyung emphasized, “We forecast K-Beauty export growth to reach 27.5% in 2027, so we view KOLMAR KOREA’s earnings growth prospects for next year positively.” He added, “The company can buy time until the new Sejong plant is completed in the second half of the year by utilizing outsourcing and idle space within existing factory sites to address production capacity shortages. From a medium- to long-term perspective, the decline in the stock price presents a buying opportunity.”