[Click eStock] "Nongshim Faces Limited Short-Term Profitability... Target Price Lowered"

Target Price Lowered from 4.9 Million Won to 4.5 Million Won
Limited Short-term Profitability;
Buy Rating Maintained

On August 18, Daishin Securities lowered its target price for Nongshim from 4.9 million won to 4.5 million won, citing limited short-term profitability improvements. However, it maintained its 'Buy' investment rating.

Jung Hansol, a researcher at Daishin Securities, explained, "In the short term, the company will face increased costs, such as marketing expenses and entry fees, which will limit overall profitability improvements. We expect a rebound in the share price once earnings visibility is secured, based on enhanced brand awareness and expansion of distribution channels."

For the second quarter of this year, Nongshim reported consolidated sales of 867.7 billion won, up 1% year-on-year, and operating profit of 40.2 billion won, down 8%, both missing consensus estimates. On a standalone basis, sales rose 2% to 703 billion won, and operating profit surged 80% to 31.2 billion won. Jung noted, "Although ramen sales volume declined due to a price increase in March, ramen sales revenue still rose 3% thanks to the price effect. Exports contracted due to the restructuring of trading partners following the establishment of a European sales subsidiary. Snacks, which benefited from new product launches, grew 6% and performed relatively well, while operating profit improved due to cost reductions such as more efficient advertising spending."

In overseas markets, sales grew by double digits, with overseas revenue up 7%, driven by new product effects and expanded distribution channels in Japan, Australia, and Vietnam. However, operating profit fell 54% due to weak performance in North America and China. Jung stated, "In North America, U.S. profitability declined by 6 percentage points due to increased promotional costs and Canadian tariffs, while Canada swung to a loss. In China, profitability also deteriorated as costs increased to expand new distribution channels and establish new products."

Looking ahead to the second half of the year, overseas momentum is expected to strengthen. Jung commented, "The full impact of domestic price increases will be realized in the second half, and overseas momentum is expected to intensify thanks to a double-digit price hike in the U.S. in July, expanded mainstream entry for 'Shin Ramyun Tumba,' new distribution channels in China, and the completion of trading partner restructuring in Europe, which will drive significant growth."

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