[Click eStock] "Nongshim, Q4 Earnings Concerns Already Reflected in Stock Price"

[Asia Economy Reporter Oh Ju-yeon] Hana Financial Investment stated that concerns about Nongshim's fourth-quarter earnings have already been reflected in the stock price, and rather, there could be benefits from increased ramen sales due to the spread of the novel coronavirus (COVID-19) in December. In this case, the possibility of exceeding earnings estimates cannot be ruled out.

According to Hana Financial Investment on the 29th, Nongshim's consolidated sales and operating profit for the fourth quarter of this year are expected to increase by 6.7% and 7.2% year-on-year, reaching 637.1 billion KRW and 21.9 billion KRW, respectively.

Separate sales and operating profit are estimated to increase by 5% and 23.3% year-on-year, reaching 510.7 billion KRW and 14.8 billion KRW, respectively.

Researcher Sim Eun-joo said, "The fourth quarter reflects a welfare-related financial loss, and at the same time, major raw material input costs (such as wheat) have been rising since the third quarter, lowering expectations for profitability."

However, with recent social distancing measures being strengthened, ramen sales in December are expected to remain strong, so the possibility of exceeding Hana Financial Investment's estimates cannot be ruled out.

Researcher Sim said, "Total ramen sales (domestic + overseas) are expected to increase by 5.5% year-on-year," adding, "Cumulative domestic ramen sales for October and November are understood to have increased by around 3%, and since December's ramen sales trend is likely to exceed this, domestic growth is expected to be stronger than anticipated."

Next year, as Nongshim's global recognition is gaining momentum due to COVID-19, attention should be paid to its leap as a global company.

Researcher Sim said, "Although concerns about next year's earnings are high due to this year's high base, steady growth in overseas subsidiaries and exports will continue, leading to an increase in overall profitability," estimating next year's consolidated sales and operating profit at 2.8045 trillion KRW and 160.8 billion KRW, respectively, which would be increases of 6.1% and 2.9% compared to this year.

Researcher Sim added, "Steady overseas sales growth is expected to offset the high domestic base next year," and said, "The current stock price has fallen to a 12-month forward price-to-book ratio (Fwd PBR) of 0.8 times, making low-price buying appear effective."