[This Week's Industry News] Nongshim Raises Ramen Prices, Tomba Opportunities Still Remain

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After suffering an 8% decline in stock price last year, damaging its reputation, the "ramen powerhouse" Nongshim is preparing for a full-scale rebound. The effect of the price increase implemented this week is expected to be reflected in the second quarter's performance. Additionally, with the upcoming global launch effect of "Shin Ramyun Tomba," 2025 is anticipated to be the "first year of overseas sales level-up."

This is undoubtedly welcome news for Nongshim shareholders, who had been dissatisfied with the sluggish performance and declining stock price that did not match the company's industry-leading status. However, persistent burdens from rising raw material prices, domestic economic contraction, and increased expenses in overseas market expansion could limit future profitability improvements.

According to the Korea Exchange on the 18th, Nongshim's stock price rose 1.57% on the previous day, the first day of the price increase for ramen and snacks, on the KOSPI market, and climbed nearly 3% again on the day, reaching 400,000 KRW per share. The stock price rise followed the announced average 7.2% increase in the ex-factory prices of 17 ramen and snack brands, including Shin Ramyun and Saewookkang, starting the previous day.

Younghoon Joo, a researcher at NH Investment & Securities, said, "The trend of declining operating profit compared to the same period last year is expected to continue until the first quarter, but concerns about performance have already been priced into the stock." He added, "From now on, attention should be paid to positive improvement factors."

Currently, the securities industry expects that the effect of Nongshim's product price increase will be fully reflected in performance starting from the second quarter. The improvement in operating profit due to this is estimated to be around 20 to 25 billion KRW annually. Researcher Joo forecasted, "Operating profit is expected to rebound in 2025 due to profitability improvement from the price increase," and predicted that Nongshim's performance this year will show a "low in the first half, high in the second half" pattern.

Eunae Ryu, a researcher at KB Securities, estimated, "The increased ex-factory prices will be fully reflected from April, when distributor inventories are depleted," and projected "a separate operating profit margin improvement of 1.1 percentage points to 4.2% compared to the previous year." Hyunjung Son, a researcher at Yuanta Securities, also evaluated, "Performance improvement and valuation increase effects experienced during past price hikes are expected."

Major securities firms updated Nongshim's target stock prices on the 13th, right after the earnings announcement, all confirming "buy" ratings within the range of 450,000 to 540,000 KRW per share. Hana Securities and DS Investment Securities each set a target price of 540,000 KRW. KB Securities set 520,000 KRW, and Shinhan Investment Corp. set 500,000 KRW. Based on the closing price on the 14th, before the price increase took effect, this implies an upside potential of up to 40%.

Another positive factor highlighted by the Yeouido securities industry alongside the price increase is "Shin Ramyun Tomba." Eunju Shim, a researcher at Hana Securities, noted, "This year will be the first year of overseas sales level-up along with domestic profitability recovery," emphasizing that the global launch of the new product Tomba began in earnest this month. She mentioned, "Google Trends for Tomba has surged significantly this month," indicating high global consumer interest. Researcher Ryu also diagnosed, "Major overseas channel entries for Shin Ramyun Tomba are progressing rapidly, and distributor demand is higher than expected."

According to Hana Securities, Nongshim's North American subsidiary's sales are expected to increase by 17% compared to the previous year. The Chinese subsidiary, which saw sales decline last year due to inventory adjustments, is forecasted to gradually recover this year thanks to normalized sales and the government's active domestic demand stimulus. Additionally, the securities industry regards the establishment of a European sales subsidiary and the resulting new market expansion as another global positive for Nongshim.

However, concerns remain as poor performance is expected until the first quarter, and the burden of raw material and promotion-related costs continues domestically and internationally. KB Securities has lowered its 2025 operating profit forecast for Nongshim, reflecting delayed domestic recovery and expenses for overseas business expansion. Woojung Kwon, a researcher at Kyobo Securities, diagnosed that despite the price increase, "the increase in marketing expenses and labor costs related to ordinary wages will limit the growth in operating profit."

Eunji Kang, a researcher at Korea Investment & Securities, also pointed out, "As domestic consumer sentiment remains weak, promotional expenses for domestic business are expected to continue even after the price increase," adding, "The North American subsidiary is scheduled for full mainstream entry of Shin Ramyun Tomba in the first half, so profitability improvement will be limited." She advised investors, "It is an important time to confirm the potential for overseas sales growth."