[Click eStock] "Nongshim, 2Q Operating Profit Below Consensus... Impact of Raw Material Price Increase"

Investment Points Remain Valid... Market Share in Korea and the US Increases
US Plant 2 Operational... South American Export Expansion Expected

[Asia Economy Reporter Hwang Yoon-joo] Daishin Securities evaluated that the profit momentum of Nongshim has weakened due to rising raw material prices on the 20th. Accordingly, it maintained a 'Buy' investment rating and a target price of 400,000 KRW.

Han Yoo-jung, a researcher at Daishin Securities, stated, "On a consolidated basis, second-quarter sales are expected to increase by 16% year-on-year to 749.3 billion KRW, while operating profit is expected to decrease by 18% to 14.1 billion KRW, falling short of the previous Daishin Securities estimate (16.5 billion KRW) and consensus (20.5 billion KRW)."

Researcher Han explained, "Despite strong sales and domestic and overseas price increases since 2021, there is a burden from rising prices of various raw and subsidiary materials," adding, "The consolidated operating profit margin is expected to be 1.9%, down 1 percentage point from the same period last year, making a profit decline inevitable."

However, the investment points are judged to remain valid. This is because the trend of increasing market share in the domestic and U.S. ramen markets is expected to continue. Additionally, with the operation of the second plant in the U.S., exports to Canada and South America are expected to expand in the second half of the year.

Researcher Han estimated, "The domestic ramen market is expected to grow by 11% compared to the same period last year," adding, "The effect of last year's price increase combined with volume growth is expected to sustain market growth in the double digits following the first quarter." Nongshim's domestic ramen market share increased by 0.9 percentage points year-on-year to 55.7%.

By product, the recovery in demand for cup noodles due to increased outdoor activities, and by brand, strong sales of existing major brands such as Shin Ramyun are expected to lead the increase in domestic and overseas sales volume, according to Researcher Han.

He added, "Sales in Korea, China, North America, and Japan this year are estimated to increase by +14%/+15%/+25%/+11% year-on-year, respectively."

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