[Click eStock] "Nongshim, Expected Record High Performance... Target Price Up"

Shinhan Investment Corp. analyzed on the 17th that Nongshim is expected to achieve the highest-ever operating profit this year. Accordingly, it maintained a 'Buy' investment rating and raised the target stock price to 450,000 KRW.

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Sanghoon Jo, a researcher at Shinhan Investment Corp., stated, "Since the second half of last year, the cost burden has gradually eased due to the decline in major grain prices."

Researcher Jo explained, "From the second quarter, we can benefit from the margin spread improvement effect due to product price increases and grain price declines," adding, "A 1%p change in Nongshim's cost of sales ratio affects operating profit by 24 billion KRW."

Researcher Jo particularly anticipated simultaneous improvements in price and demand. He analyzed, "In the past, Japan, which experienced a long-term recession, and the U.S. last year, which underwent rapid inflation, saw popularity in PB products and inexpensive goods," and added, "Considering the emergence of the new term 'lunchflation' domestically, there is high expectation for sales growth of ramen with lower price points."

Nongshim is the number one player in the ramen market. The average selling price (ASP) is only 667 KRW, and even based on consumer prices, it holds high price competitiveness compared to substitutes such as dining out or convenience foods.

Researcher Jo evaluated, "Despite two price increases over the past two years, the still high price competitiveness compared to substitutes and the long-established brand power will stand out as major strengths amid the current high uncertainty."

Furthermore, he forecasted that high growth overseas will be maintained this year as well. This is because demand in overseas markets is steadily increasing and periodic price increases are possible.

Researcher Jo assessed, "The cost input due to channel expansion has also been completed," adding, "This year, 25% of consolidated sales and 48% of operating profit are generated from overseas, increasing profit contribution."

He continued, "In particular, the operating rate of the second U.S. plant (which increased production capacity by 60% compared to the existing capacity) is rising faster than expected (currently about 45%), and a reversal of market share with the number one player can be anticipated, which is a valuation premium factor."

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