[Click eStock] "Samyang Foods, Short-term Earnings Pressure... Long-term Outlook Positive"

Last Year's Base and Cost Increase Burdens Remain
Daishin Securities Lowers Samyang Foods Target Price from 120,000 KRW to 110,000 KRW

[Asia Economy Reporter Gong Byung-sun] Samyang Foods is expected to show somewhat disappointing short-term performance last year due to the base effect and rising costs. However, it is expected to grow in the long term, supported by overseas sales.

On the 1st, Daishin Securities lowered Samyang Foods' target stock price from the previous 120,000 won to 110,000 won. The closing price on the previous day was 83,300 won. The investment opinion was maintained as 'Buy.'

Daishin Securities lowered its annual profit estimates for Samyang Foods, which led to the reduction of the target stock price. Daishin Securities reduced its sales estimate for Samyang Foods this year from 646 billion won to 609 billion won, a 5.7% decrease. Operating profit was also revised down from 79 billion won to 64 billion won, an 18.7% decrease.

Han Yoo-jung, a researcher at Daishin Securities, explained, "Due to the base effect and rising cost burden last year, poor performance compared to the previous year is inevitable in the second half as well."

However, the long-term outlook is expected to be positive as the company embarks on strategic overseas market expansion. Samyang Foods has decided to establish Samyang America and Samyang Foods Shanghai Co., Ltd., its subsidiaries in the United States and China, respectively. They are scheduled to start operations on the 30th of this month and November 30th, respectively. This will enable more direct sales and marketing, which is expected to positively impact profitability.

Export prices are also expected to rise. From the 1st, the prices of 13 domestic ramen products, including Samyang Ramen and Buldak Bokkeum Myun, will increase by an average of 6.9%. Export prices are also decided to increase similarly to domestic prices. By the end of the year, the effect of the price increase is expected to be reflected, gradually easing the cost burden.

The completion of the new factory is also a positive factor. On June 18th, Samyang Foods corrected its disclosure to increase the production lines of the Miryang new factory from 3 to 4 lines. As a result, the investment amount excluding land acquisition increased by 29.1 billion won. The annual production capacity (CAPA) of the Miryang new factory is expected to be 800 million units, and even after closing the old Wonju line, the net increase is estimated to be 600 million units. Researcher Han said, "With the completion of the Miryang new factory in March next year, production capacity improvement and efficiency increase are expected."