[Click eStock] "Nongshim, Profit Improvement Expected if Ramen Prices Increase"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 500,000 KRW on Nongshim on the 30th, expecting profit improvement if the ramen selling price is raised.

Nongshim's consolidated sales and operating profit for the second quarter are expected to be 633.2 billion KRW and 18.9 billion KRW, respectively. Due to high stockpiling demand caused by COVID-19 last year, these figures are estimated to decrease by 5.2% and 54.3% compared to the same period last year. Total ramen sales in domestic and overseas markets are expected to decline by 6.6% compared to the same period last year. While the domestic market is expected to show a significant decrease of about 9% compared to a year ago, exports are estimated to have grown by 5%, resulting in solid performance.

The domestic ramen market share is estimated to be around 55% in terms of value, increasing by 0.6 percentage points compared to a year ago. This increase in market share is attributed to the strong sales of the new product ‘Bae Hong Dong,’ and it is predicted to deliver performance outperforming the market.

Snack sales are expected to decline by 8% compared to a year ago due to a high base last year. Combined sales of overseas subsidiaries are expected to slightly decrease compared to last year, partially offsetting the high base of standalone performance. The U.S., including Canada, is estimated to have grown by about 5% despite the high base last year, while sales in China are predicted to have decreased.

Sim Eun-joo, a researcher at Hana Financial Investment, said, “Due to the burden of last year's low base, short-term performance momentum is limited,” adding, “With significant increases in key raw material prices such as wheat and palm oil, profit improvement is unlikely to be easy until the second half of the year.”

However, if domestic ramen prices increase, the profit scale is expected to grow. The last time Nongshim raised domestic ramen prices was in December 2016. Researcher Sim explained, “If prices increase by 5%, profit improvement of about 30 billion KRW is expected,” and “Consolidated operating profit and controlling net profit for this year are expected to improve by 27% and 20%, respectively.” She added, “Although short-term performance momentum is limited, considering the possibility of price increases and meaningful expansion overseas, buying at a low price is valid.”

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