[Click eStock] "Nongshim Expected to Miss Q3 Earnings Estimates... Target Price Down"

Target Price Downgraded from 580,000 KRW to 550,000 KRW

On the 22nd, IBK Investment & Securities downgraded the target price of Nongshim from 580,000 KRW to 550,000 KRW, anticipating that the company's third-quarter earnings this year will fall short of market expectations. The investment rating was maintained at 'Buy.'

Kim Taehyun, a researcher at IBK Investment & Securities, explained, "We lowered the target price due to downward revisions in earnings estimates for 2024-2025. However, we maintain a buy rating as we believe there is still significant potential for business expansion in the U.S."

Nongshim's third-quarter earnings are expected to underperform market forecasts. Researcher Kim said, "The consolidated sales for the third quarter are projected to increase by 2.3% year-on-year to 875.3 billion KRW, while operating profit is expected to decline by 6.0% to 52.3 billion KRW, falling short of the consensus estimates of 887 billion KRW and 55.4 billion KRW, respectively. Although cost pressures will ease, sluggish domestic and Chinese sales combined with increased expenses such as promotional costs are expected to reduce the operating margin by 0.5 percentage points."

Regarding the domestic corporation, exports showed strong performance, but domestic demand was disappointing. Kim said, "Domestic corporation sales are forecasted to grow slightly by 2.5% year-on-year to 636 billion KRW, while operating profit is expected to decrease by 26.1% to 24.8 billion KRW. Despite strong export trends to Europe and Southeast Asia, sales of beverages and other products are sluggish due to weakened domestic consumption, resulting in only modest sales growth. Additionally, increased sales discounts (such as sales incentives and logistics fees) for defensive sales measures will continue to pressure profits."

North American and Chinese subsidiaries are also expected to deliver results below expectations. Kim stated, "Although U.S. sales were favorable, sales are expected to remain flat year-on-year due to inventory depletion in Canada, and profitability will decline due to increased marketing expenses. The Chinese subsidiary also underperformed expectations in online sales resulting from collaboration with Chinese distributor Youbei."

Expectations for expanded U.S. sales remain valid. Kim analyzed, "The new production line at the second U.S. plant is currently in trial operation and is expected to start full-scale operation from November, which will likely lead to the launch of new non-soup ramen and cup noodle products. Furthermore, moving from the existing Asian food section to the main aisle at Walmart, where Japanese competitors’ products are displayed, will help expand the product lineup and increase brand awareness."

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