[Click eStock] "Nongshim to Exceed Market Expectations in Q3 Earnings"

Hana Financial Investment Report
Q3 Operating Profit 36 Billion KRW... 94% Increase YoY
Overseas Proportion Expanded to 41% in 2023... "Right Time for Bargain Buying"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 500,000 KRW for Nongshim on the 3rd, expecting strong third-quarter earnings.

Nongshim's third-quarter consolidated sales and operating profit are expected to increase by 10% and 94% year-on-year to 650.2 billion KRW and 36 billion KRW, respectively. The domestic ramen segment appears to have depleted the stockpiling demand from the first half by June. Domestic ramen sales in July are estimated to have increased by 5% compared to the same month last year. As the social distancing level 2.5 began, ramen demand is expected to strengthen further toward September. The domestic snack segment also seems to benefit from the advertising effect of ‘Kkang’.

The overseas ramen segment is also expected to deliver strong performance. Not only exports but also the U.S. and China subsidiaries are anticipated to grow by more than 30% year-on-year. Eunju Shim, a researcher at Hana Financial Investment, said, “We do not consider Nongshim’s overseas high growth simply as stockpiling demand caused by COVID-19,” adding, “Attention should be paid to the changing perception of ramen among people.”

Among Americans, ramen is rapidly emerging as a meal substitute, with repurchase rates significantly increasing. The New York Times selected ‘Shin Ramyun Black’ as the most delicious ramen in the world, reflecting favorable local evaluations. The biggest difference now is that people come to try it, whereas in the past, they did not seek it out. Currently, the top-line growth of the U.S. subsidiary is driven by mainstream channels such as Walmart.

Researcher Shim explained, “The establishment of the Canadian subsidiary in the second quarter was for this reason,” and analyzed, “If the second U.S. factory is completed, regional coverage can be expanded to South America, which will further boost overseas growth.”

Nongshim’s overseas sales ratio is estimated to rise from 30% in 2019 to 36% in 2021 and 41% in 2023. Shim said, “The sharp increase in profits of overseas subsidiaries will play a key role in mid- to long-term margin improvement,” and assessed, “It is a valid time for value buying.”