[Click eStock] "Nongshim, 1Q Results Meet Expectations... 2Q Cost Burden to Increase"

[Asia Economy Reporter Myung-Hwan Lee] Hana Financial Investment announced on the 17th that it maintains a buy rating and a target price of 440,000 KRW for Nongshim. Although the first-quarter results met market expectations, the cost burden is expected to increase in the second quarter.

Nongshim's consolidated sales for the first quarter of this year reached 736.3 billion KRW, with an operating profit of 34.3 billion KRW. These figures represent increases of 16.1% and 21.2%, respectively, compared to the same period last year, meeting market expectations. On a separate basis, sales increased by 12.7% year-on-year to 569 billion KRW, and operating profit surged by 137.1% to 26.3 billion KRW.

The top-line growth of ramen both domestically and internationally was evaluated as solid. Total ramen sales, including domestic and overseas exports, increased by 12.7% year-on-year, showing similar growth trends in both domestic and overseas markets. The domestic ramen market share rose by 2.4 percentage points from the same period last year to 56.8%. However, while the domestic market defended cost pressures through price increases and raw material inventory, overseas profitability deterioration was deemed inevitable. Despite a high base last year, exports showed meaningful growth centered on Europe and Southeast Asia.

Snack segment sales also increased by 12.7% compared to the same period last year, driven by price hikes in March and strong sales of new products. Overseas subsidiaries continued their high growth trend, with North American sales increasing by 35.7% year-on-year. However, due to overall cost burdens such as raw material and logistics expenses, profits sharply declined from 10.7 billion KRW last year to 3 billion KRW.

Hana Financial Investment forecasts Nongshim's consolidated sales for the second quarter of this year to increase by 8.6% year-on-year to 703.8 billion KRW, while operating profit is expected to decrease by 9.7% to 15.7 billion KRW. Despite price increases domestically, operating profit is expected to slightly decline compared to the same period last year due to the recent surge in raw material input costs. Overseas subsidiaries are implementing price increases to defend profitability; although profit decline is unavoidable until the second quarter, a recovery trend is expected in the second half compared to the first half.

Sim Eun-joo, a researcher at Hana Financial Investment, stated, "Despite significant ramen sales growth domestically and internationally, short-term performance and stock momentum are expected to be limited due to the sharp rise in major raw material costs."

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