[Click e-Stock] "Nongshim at the Start of Overseas Momentum Expansion Cycle... Target Price Raised"

Target Price Raised by 10% from Previous Level

On November 17, Shinhan Investment & Securities raised its target price for Nongshim from 5.2 million won to 5.7 million won, stating that the company is at the beginning of an overseas momentum expansion cycle. The investment opinion remains 'Buy.'

Shinhan Investment & Securities analyst Cho Sanghoon explained, "We raised our target price by 10% from the previous level as we revised up our estimates due to domestic and overseas price hikes and a recovery in sales volume. Although overseas sales growth momentum slowed over the past two years, it has started to recover in the second half of the year, and a rebound in the share price is expected. In the future, overseas top-line growth through product and channel expansion will determine the company's mid- to long-term valuation level."

In the third quarter of this year, Nongshim recorded sales of 871.2 billion won, up 2.4% year-on-year, and operating profit of 54.4 billion won, up 44.6%. Analyst Cho said, "Thanks to domestic and overseas price hikes, the company delivered a surprise, exceeding the consensus (average securities firm forecast) by 20%. Standalone ramen sales increased by 5.1%, and market share remained at 55.7%, the same as last year, while snacks grew by 9.4%. Exports fell by 11% due to the restructuring of sales channels following the establishment of a European sales subsidiary, but the full-year effect of price hikes and improved SG&A efficiency led to a 146% increase in operating profit."

Overseas, continued costs related to entering 'Tumba' stores resulted in a 39% decline in combined operating profit for overseas subsidiaries. Analyst Cho noted, "In the US, sales fell by 7%, and increased promotional activities led to a 60% drop in operating profit. However, in the fourth quarter, both sales and operating profit are expected to return to growth, driven by the effects of price hikes, the expansion of K-Pop Demon Hunters collaboration products, and increased entry into major Tumba distribution channels."

This is analyzed as the beginning of an overseas momentum expansion cycle. Analyst Cho explained, "Since October last year, the company has been expanding its brand lineup by securing shelf space in the main aisles of Walmart in the US and adding new production lines at its second plant. In addition, the establishment of a European sales subsidiary in March this year is expected to lead to expansion into new markets."

The company plans to sell K-Pop Demon Hunters collaboration products through the first quarter of next year. Analyst Cho assessed, "Although the sales scale is around 50 billion won, which is not a large proportion of consolidated sales, it is positive as it can enhance marketing capabilities, which have lagged behind the strong product competitiveness."

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