[Click eStock] "Nongshim, 2Q Earnings Hit Bottom... Historic Low Stock Price"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment stated on the 18th that Nongshim's annual performance is expected to show a sharp improvement after hitting the bottom in the second quarter, and its stock price is at the lower end of the historical band, making it an attractive valuation.

Nongshim's consolidated sales and operating profit in the second quarter were 647.9 billion KRW and 17.3 billion KRW, respectively, down 3% and 58.3% compared to the same period last year, slightly missing market expectations. This is evaluated as a predicted slump due to a low base effect and increased cost burdens.

Total domestic and overseas ramen sales decreased by 4.6% year-on-year, with domestic sales down 7.3% while exports increased by 8.3%. During this period, total domestic ramen demand fell by 8%, but Nongshim's market share (by value) expanded by 0.4 percentage points to 54.8% compared to the previous year.

Snack sales decreased by 6.4% year-on-year due to a high base last year, but combined overseas subsidiary sales increased by 2.8%. While the U.S. market grew rapidly by 19.2%, China saw a 23.5% decline.

Consolidated operating profit for the third quarter of this year is expected to decrease by 9.6%, but growth of 11.6% is projected from the fourth quarter. The effect of ramen price increases is expected to begin reflecting as early as September, leading to a sharp year-on-year profit improvement, and export prices in the second half are also expected to be adjusted following domestic ramen price hikes.

Sim Eun-joo, a researcher at Hana Financial Investment, said, "The second quarter was greatly affected by last year's low base effect, but sluggish domestic demand in China also negatively impacted sales," adding, "Assuming a 6% price increase by the Chinese subsidiary, the consolidated operating profit is expected to increase by about 6 billion KRW compared to previous estimates." The last price increase by the Chinese subsidiary was in August 2017.

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