[Click eStock] "Nongshim, Price Increase Effect... Earnings Improvement Expected Until Next Year"

Hana Securities Report

[Asia Economy Reporter Minji Lee] Hana Securities maintained its buy rating and target price of 440,000 KRW for Nongshim on the 25th, based on the expectation of improved performance due to increased selling prices and sales volume.

On the previous day, Nongshim announced that it will raise the average selling price of ramen by 11.3% and snacks by 5.7% starting from the 15th of next month. The last price increase was in August of last year. This decision is considered inevitable due to the increased burden of raw material costs caused by global supply chain disruptions this year. The price increase is expected to result in an approximately 7% increase in annual consolidated sales compared to previous estimates.

Sim Eun-joo, a researcher at Hana Securities, said, “In terms of gross profit, there will be an improvement effect of about 40 to 50 billion KRW compared to previous estimates,” adding, “Considering the possibility of additional raw material price increases such as flour in the second half, a conservative figure, the effect of the price increase will be reflected in the performance starting from the fourth quarter of this year.”

The price increase is expected to be reflected gradually. From the third quarter, margin defense is anticipated through export and overseas subsidiary price adjustments and efficiency improvements in advertising and promotional expenses. From the fourth quarter, as the price increase effect of domestic ramen and snacks is reflected, a clear profit growth trend is expected. Next year’s consolidated sales and operating profit are conservatively estimated to increase by 9.5% and 46% compared to this year, reaching 3.3293 trillion KRW and 137.3 billion KRW, respectively.

Researcher Sim Eun-joo analyzed, “While steady topline growth continues domestically and internationally, overseas coverage will expand to South America including Mexico from the second half through the expansion of the second plant in the U.S.,” adding, “Considering domestic and overseas price increases, 2023 will be a year of growth in both price and sales volume.”

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