[Asia Economy Reporter Song Hwajeong] Nongshim is showing strength following the news of a ramen price increase. The stock has been on the rise for four consecutive days.
As of 9:13 AM on the 30th, Nongshim was trading at 329,500 KRW, up 3,500 KRW (1.07%) from the previous day.
The stock price is interpreted to be driven by expectations of improved earnings due to the ramen price hike. The day before, Nongshim announced that starting from the 16th of next month, it will raise the shipment prices of major ramen products, including Shin Ramyun, by an average of 6.8%. This is the first time Nongshim has increased ramen prices in 4 years and 8 months since December 2016. The price increase rates for major products based on shipment prices are 7.6% for Shin Ramyun, 6.1% for Ansungtangmyun, and 4.4% for Yukgaejang Sabalmyeon.
Researcher Jomi Jin from NH Investment & Securities analyzed, "With the average 6.8% increase in ramen shipment prices, it is estimated that there will be an annual sales improvement effect of 90 billion KRW," adding, "Considering the coverage of cost increases and promotional events to defend against initial volume declines, the operating profit improvement effect is expected to be around 40 billion KRW annually." Researcher Cho further noted, "Given the recent situation where the domestic separate corporation's annual operating profit remains at around 30 to 40 billion KRW due to intensified competition, the possibility of approximately doubling operating profit is quite significant."
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