Will Ramen and Alcohol Stocks Stretch Out Next Year?

On the 1st, the KOSPI index opened lower due to the sluggish U.S. stock market. Dealers are working in the dealing room of Hana Bank in Euljiro, Seoul. The won-dollar exchange rate opened at 1,185.0 won, up 1.0 won from the previous session, showing a stable trend. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] The alcoholic beverage and ramen industries, which had contracted due to COVID-19, are expected to start recovering from next year.

Hana Financial Investment announced on the 3rd that it expects differentiated performance improvements among food and beverage companies and is focusing on the performance recovery of alcoholic beverage and ramen companies next year.

In the beer sector, annual performance declined by over 10% last year due to COVID-19, and in the first half of this year, performance decreased by about 7% compared to the previous year. It is estimated that in the third quarter of this year, social distancing level 4 caused a double-digit decline in performance compared to the same period last year.

However, Hana Financial Investment believes that if the beer sector recovers to the level of the first half of 2020, the first year of the COVID-19 outbreak, the alcoholic beverage market in 2022 could see a year-on-year (YoY) growth of 7-13%. With the recovery of front-end demand, HiteJinro and Lotte Chilsung are expected to see their consolidated operating profits increase by 21.6% and 20.1%, respectively, compared to this year.

Ramen companies that have pursued price increases are also expected to benefit from performance leverage. Nongshim’s domestic ramen price increase (6.8%) will start to be fully reflected from the fourth quarter of this year, and it is forecasted that this will improve gross profit by about 40 billion KRW compared to previous estimates.

Sim Eunju, a researcher at Hana Financial Investment, analyzed, "Nongshim’s separate selling and administrative expense ratio was 26.6% in 2017 but is estimated to be 23.2% this year," adding, "Next year’s consolidated operating profit is expected to increase by 30.7% YoY."

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