[Click eStock] "Nongshim, Market Competition Easing and Expansion Strategy Effective"

[Asia Economy Reporter Lee Jung-yoon] Hi Investment & Securities maintained a buy rating and a target price of 400,000 KRW on Nongshim on the 30th, stating that the easing competition in the main product market and the strategy for expanding scale remain valid.

Nongshim's consolidated sales for the first quarter of this year are expected to increase by 9.3% year-on-year to 693.2 billion KRW, and operating profit is forecasted to rise 14% to 32.3 billion KRW. Due to the burden related to rising domestic and international raw material prices, operating profit is expected to slightly underperform the market consensus estimate of 36.4 billion KRW.

Domestic ramen sales are expected to grow by 7.6% compared to the previous year. Lee Kyung-shin, a researcher at Hi Investment & Securities, said, "As resistance to volume caused by price increases is resolved, it is estimated that a virtuous cycle will be created, leading to actual operating performance expansion and the added effect of some new products," adding, "Considering the recent ramen market situation centered on main products, although there will be differences in degree, the market dominance is judged to continue in a solid trend."

In the case of snacks, the effect of new products is expected to be added, and the price increase of an average of 6% reflected from March is also expected to have a significant impact. The researcher said, "Although the profit leverage effect is somewhat disappointing due to increased burdens related to rising raw material costs such as flour, palm oil, and packaging materials, it is necessary to focus on solid short-term scale growth and market dominance."

Regarding the overseas sector, there are regional differences. In the United States, growth centered on new products continues, and the reflection of price increases is also expected to be significant. Additionally, the new factory scheduled to start operation in April this year is analyzed as a positive factor because it can respond to both main and new products in the US ramen market. However, in China, due to sluggish domestic demand, short-term price increases for relatively high-priced Nongshim products are expected to be difficult.

The researcher said, "While the cost burden related to rising raw material prices is likely to persist until the third quarter of this year, the strategy to expand scale by leveraging Nongshim's market dominance through easing competition in main products, improving selling and administrative expenses efficiency, price increases, and new product launches is judged to be more effective compared to other competitors."

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