[Click eStock] Nongshim Raises Ramen Prices by 6.8% After 5 Years... Stock Bottom "Target 500,000 Won"

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 30th that it maintains its investment opinion of 'Buy' and target price of '500,000 KRW' for Nongshim.

On the previous day, Nongshim announced an average price increase of 6.8% for ramen starting from the 16th of next month. Considering the last price increase was in December 2016, this is the first increase in about five years. Given the increased burden of major raw materials (wheat, palm oil, boxes, etc.) during this period, this price hike is considered an inevitable choice. It is estimated that this price increase will result in a 3.3% and 35.0% increase in annual consolidated sales and operating profit, respectively, compared to previous estimates. In terms of gross profit, an improvement of about 40 billion KRW compared to previous estimates is expected. Considering inventory in distribution channels, the price increase is expected to start reflecting in performance from November. Taking the above into account, a steady profit improvement trend is expected from the fourth quarter of this year through the second half of next year.

Domestically, earnings growth is possible from the fourth quarter, and overseas remains robust. Consolidated operating profits for the second, third, and fourth quarters of this year are estimated to increase by -54.3%, 0%, and +8.0%, respectively. Considering the high domestic base last year and the timing of the price increase reflection, a significant decline in separate profit and loss is inevitable until the third quarter. However, from the fourth quarter, as the price increase begins to be reflected, a comfortable earnings trend can be expected through next year. The expansion of Nongshim's global recognition due to COVID-19 has led to net growth in exports and overseas subsidiaries, which is positive. Nongshim's overseas proportion is estimated to expand from 30% in 2019 to 38% in 2021. This is a point where a reevaluation of mid- to long-term overseas growth is expected.

On the other hand, the stock price is at a historically low level. The current stock price is trading at a 12-month forward PBR of 0.9 times. Sim Eun-joo, a researcher at Hana Financial Investment, emphasized, "The stock price is positioned at the lower end of the historical band, offering an attractive valuation," adding, "Although short-term performance will be sluggish due to the low base effect from last year, it is expected to enter a comfortable earnings growth phase in the second half, making it a valid time for bargain buying."

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