[Click eStock] "Nongshim, Demand Increase Due to COVID-19 Allows Expectation of Performance Improvement Through Q2"

[Asia Economy Reporter Eunmo Koo] Hana Financial Investment forecasted that Nongshim will continue to deliver strong performance not only in the first quarter but also through the second quarter of this year, as demand increases due to the impact of the novel coronavirus disease (COVID-19).

On the 27th, Eunju Shim, a researcher at Hana Financial Investment, estimated in a report that Nongshim's consolidated sales for the first quarter would reach 648.4 billion KRW, a 10.2% increase compared to the same period last year, and operating profit would rise by 37.5% to 43.5 billion KRW. Despite rising market expectations, the outlook suggests that these figures could be exceeded. Researcher Shim stated, "Nongshim increased its factory operating rate from mid-February, and this trend appears to have continued through March," adding, "First-quarter ramen sales are expected to benefit from an increase of 34 billion KRW compared to the previous year."

While the overall ramen market likely performed well in the first quarter due to COVID-19, Nongshim's market share is analyzed to have risen compared to its peers. Researcher Shim noted, "Even before the mid-February increase in operating rates, advertising effects from 'Rakkinam' and 'Parasite' were effective, and COVID-19-related demand was likely greater for soup-based ramen than for bibim-myeon (spicy mixed noodles)," evaluating that "Nongshim probably secured a category advantage." She further predicted, "With social distancing measures intensifying from mid-month, the share of home dining increased significantly over eating out, which is expected to positively impact ramen sales, supporting expectations for improved performance in the second quarter."

Expansion of overseas recognition is also viewed positively. Researcher Shim said, "As COVID-19 spreads worldwide, ramen demand is surging," adding, "Sales of Korean food companies in the U.S. are estimated to have increased by 30% year-over-year, and contrary to concerns, the Chinese subsidiary is expected to achieve double-digit growth in the first quarter compared to the same period last year."

Strong performance is anticipated through the second quarter of this year, and the stock's momentum remains valid. Researcher Shim evaluated, "Nongshim demonstrated its value as a defensive stock during this recent sharp decline," and "With the first-quarter earnings announcement imminent and expectations for improved second-quarter results still valid," she assessed that considering historical valuation bands, the stock remains undervalued and the upward momentum is still effective.

This content was produced with the assistance of AI translation services.