[Click eStock] "Nongshim, Weak Q1 Earnings... Overseas Growth Remains Valid"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 500,000 KRW for Nongshim on the 7th. Although first-quarter earnings are expected to decline compared to last year, overseas sales growth is projected to continue.

First-quarter sales and operating profit are estimated at 680.6 billion KRW and 36.9 billion KRW, respectively, down 1% and 42% year-on-year. Separate sales and operating profit are expected to decrease by 4.7% and 49.6%, respectively, to 527.8 billion KRW and 23.8 billion KRW.

Sim Eun-joo, a researcher at Hana Financial Investment, said, "The significant decline in profit compared to the previous year is due to stockpiling demand caused by COVID-19," adding, "Total ramen sales, including domestic and overseas, are estimated to decrease by 6.8% year-on-year."

Regarding ramen sales, domestic sales are expected to decline by about 10.5% year-on-year, but overseas exports are anticipated to grow by 18%. The domestic market share of ramen is estimated to have increased by 0.3 percentage points to 56.5% based on value compared to the previous year.

Snack sales are also expected to decrease by about 7% due to last year's high performance. Combined overseas subsidiary sales are projected to increase by 13.5%, partially offsetting the strong performance of the domestic segment in separate results. North American and Chinese subsidiaries are predicted to record double-digit growth compared to last year.

Annual consolidated sales are expected to grow by 2.8%, while operating profit is estimated to decline by 22.6%. Quarterly results are expected to follow a pattern of lower first half and higher second half. Attention should be paid to the solid upward trend in the overseas segment starting in the second half. This is because Nongshim's global recognition has expanded due to COVID-19, and exports and overseas subsidiaries are expected to continue double-digit sales growth.

Researcher Sim said, "Nongshim's overseas proportion is expected to expand from 30% in 2019 to 38% in 2021," explaining, "This is a point where a reevaluation of mid- to long-term overseas growth is anticipated."