[Click eStock] Nongshim Challenges Record High Stock Price with Historic Operating Profit

[Asia Economy Reporter Lee Seon-ae] SK Securities announced on the 24th that it maintains a buy rating on Nongshim and raises the target price from 420,000 KRW to 475,000 KRW. This is based on the expectation of a strong margin rebound this year.

Park Chan-sol, a researcher at SK Securities, emphasized, "As operating profit is expected to reach a historic scale this year, the stock price is also expected to surpass the 2020 price level and challenge an all-time high."

Nongshim's operating profit margin in the fourth quarter of last year improved by 2.3 percentage points compared to the previous quarter, and a strong margin rebound is expected to continue this year. Researcher Park stated, "In the third quarter of last year, the domestic corporation raised ramen prices by more than 10%. This increase was made under the special circumstances of the Ukraine-Russia war and is a higher rate than the past 5-6%. The margin improvement effect from the domestic corporation's price increase is expected to continue until the third quarter of this year."

He added, "The North American corporation, which has a relatively high margin, is experiencing high growth. After raising prices in the second quarter of last year, the North American corporation grew by 52.4% in the third quarter. High growth is expected to continue this year due to increased utilization of the second plant."

A decline in cost ratio is also anticipated. Researcher Park said, "It is believed that a decline in raw material-related cost ratio was partially reflected in the fourth quarter of last year, and the cost of goods sold ratio is expected to fall from around 73.0% in the second to third quarters of last year to about 68.0% this year."

Nongshim's stock price over the past 10 years has shown a high correlation with operating profit. Operating profit this year is highly likely to reach a historic peak. A multiple expansion similar to the past margin spread expansion cycle in 2023 is expected. Researcher Park said, "We raised the 2023 operating profit and controlling shareholder net income estimates by 13% and 16%, respectively, and raised the target price. Despite the ramen price increase, steady ramen demand is confirmed, and a strong margin spread improvement is expected, so the stock price will also challenge an all-time high."

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