[Click eStock] "Nongshim, This Year's Tumba Settlement Is Key... 4Q Slump Leads to Target Price Cut"

Target Price Set at 450,000 KRW...
Investment Rating Maintained as 'Buy'

On the 20th, IBK Investment & Securities downgraded the target price of Nongshim from 550,000 KRW to 450,000 KRW, an 18.2% decrease, citing expectations that the company's Q4 earnings last year would fall short of consensus. However, the investment rating was maintained as 'Buy' due to the favorable initial sales performance of Shin Ramyun Tomba and the anticipated expansion of overseas sales, including in the United States.

Researcher Kim Taehyun of IBK Investment & Securities stated that the key factor this year will be whether Shin Ramyun Tomba can establish itself in domestic and international markets.

First, Researcher Kim said, "Nongshim's Q4 earnings last year (889.5 billion KRW in revenue, 31.1 billion KRW in operating profit) are expected to fall short of IBK Investment & Securities' previous estimates (928.4 billion KRW, 44.6 billion KRW) and consensus (88.9 billion KRW, 42.8 billion KRW)." He also forecasted that "domestic consumption is expected to continue slowing this year."

He diagnosed, "In Q4 last year, domestic sales of snacks and beverages were sluggish but were offset by the launch effect of new noodle products such as Shin Ramyun Tomba and strong exports to Europe and Southeast Asia, leading to a slight improvement in sales." However, "due to rising palm oil prices, sales discounts, and increased labor costs, the profit decline trend likely continued." He further explained, "Overseas, a recovery centered on the United States is expected to improve by 8.3%, but profit margins will decline due to increased promotional expenses, entry fees, and initial cost burdens from operating the second North American plant."

Accordingly, the establishment of Shin Ramyun Tomba in domestic and overseas markets was identified as a key issue this year. Researcher Kim analyzed, "The monthly domestic sales of Tomba are about 6 billion KRW, which is favorable considering that the average initial monthly sales of new ramen products are around 3 to 4 billion KRW." He also mentioned prospects such as entry into Walmart in the U.S., stating, "The expectation of improved U.S. sales performance due to the launch of Tomba remains valid. In China, partnerships with Youbei will be strengthened, and new product launches including Shin Ramyun Tomba will be expanded."

Researcher Kim projected that fixed costs will increase due to the expansion of the second North American plant line until the first half of the year, but profitability is expected to improve significantly in the second half.