[Click eStock] "Nongshim, Overseas Business Growth Expected Despite Base Burden"

[Asia Economy Reporter Song Hwajeong] Daishin Securities maintained its 'Buy' rating and target price of 400,000 KRW for Nongshim on the 27th, noting that although there is a base effect burden until the second quarter of this year, attention should be paid to the growth of its overseas business division.

The first-quarter performance this year is expected to meet market consensus. Daishin Securities estimated Nongshim's consolidated first-quarter sales at 670.1 billion KRW, a 3% decrease compared to the same period last year, and operating profit at 36.9 billion KRW, down 42%. Researcher Han Yujeong of Daishin Securities analyzed, "This performance aligns with the lowered consensus of 38.4 billion KRW. Due to the base effect burden from the surge in demand at the beginning of the COVID-19 outbreak last year, domestic ramen sales declined by 11% and snack sales by 8%, making contraction inevitable. However, compared to the first quarter of 2019, sales increased by 5% each, indicating sustained demand at a higher-than-average level." The domestic ramen market share is estimated to have risen by 0.2 percentage points year-on-year to 56.4%.

The overseas segment is expected to have continued its growth trend. Despite strong export and overseas subsidiary performance in the first quarter of last year, export sales in the first quarter are estimated to have increased by 16% year-on-year, with sales from the China subsidiary up 4% and combined North American sales up 8%.

Daishin Securities forecasts that the overseas combined operating profit ratio for Nongshim will reach 44% this year and 45% next year. Researcher Han stated, "The second plant in the United States is scheduled to begin operations as early as the end of this year or by early next year at the latest. Last year, the first U.S. plant operated at an 81.7% capacity rate. With the second plant in operation, more stable product supply in the U.S. will be possible, and expansion into Canada and South America is expected to accelerate." He added, "Although there is a base effect burden until the second quarter, attention should be paid to the growth of the overseas business division."