[Click eStock] "Nongshim, Profitability Indicators Decline... Target Price Lowered"

NH Investment & Securities on the 10th downgraded the target price for Nongshim by 14% to 490,000 KRW, reflecting the decline in profitability indicators of domestic and overseas subsidiaries. The buy rating was maintained.

On the same day, Younghoon Joo, a researcher at NH Investment & Securities, stated, "We lowered the earnings estimates for domestic and overseas subsidiaries due to consumer recession and increased promotional activities."

For the fourth quarter on a consolidated basis, sales and operating profit are expected to reach 893.2 billion KRW and 41.2 billion KRW respectively, representing increases of 4% and 6% compared to the same period last year. This would mark a return to an operating profit growth trend after five quarters.

Domestic (separate) sales are projected to increase by 3% year-on-year to 628.9 billion KRW, reflecting the effect of the new product launch (Shin Ramyun Tomba) despite the slow recovery of the domestic consumption market. Overseas subsidiary sales are estimated at 253.7 billion KRW, a 6% increase. The U.S. subsidiary is expected to achieve double-digit sales growth due to the relocation of Walmart's main display and the effect of new products. However, promotional costs are likely to increase, so a conservative approach is still necessary regarding profitability.

Researcher Joo emphasized, "It is necessary to pay attention to these positive changes," adding, "The current stock price corresponds to a price-to-earnings ratio (PER) of only 12.0 times based on next year's estimates, indicating that concerns about poor performance are largely reflected."

He further stated, "Next year, the U.S. subsidiary is expected to see a full-scale sales rebound due to the operation of a new line at the second plant and the relocation of Walmart's main display. The Chinese subsidiary is also expected to improve performance as online distribution channels normalize," adding, "Exports of ramen to Europe are rapidly growing, surpassing 100 billion KRW annually for the first time. The plan to establish a European sales subsidiary in the first quarter of next year is also likely to have a positive impact on the stock price."