Deepening Woes Amid Soaring Rivals... Can Toowoomba's Success Revive Nongshim? [Stock of the Week]

Q2 Results Fall Short of Expectations
Ten Securities Firms Cut Target Prices
Stock Price Rebound Hinges on Growth Recovery
Gradual Improvement Expected in the Second Half

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Nongshim's concerns are deepening. The company posted disappointing results again in the second quarter of this year. Growth has stagnated, and the persistent cost burden is slowing down performance improvement. As competitors continue to excel, Nongshim's results and stock price appear even weaker by comparison. However, gradual improvement is expected in the second half of the year, so it will be important to monitor how things develop.

Nongshim Toowoomba Advertisement Video. Nongshim YouTube.

Weak Earnings and Falling Stock Price... Recovery of Growth Is Key

According to financial information provider FnGuide on August 20, ten securities firms have recently lowered their target price for Nongshim. Korea Investment & Securities reduced its target price from 520,000 won to 490,000 won, NH Investment & Securities from 510,000 won to 480,000 won, and KB Securities from 520,000 won to 500,000 won. Daol Investment & Securities and LS Securities both lowered their targets from 500,000 won to 450,000 won, while Yuanta Securities and Daishin Securities each reduced theirs from 490,000 won to 450,000 won. Eugene Investment & Securities lowered its target from 497,000 won to 450,000 won, Shinhan Investment & Securities from 500,000 won to 460,000 won, and iM Securities from 550,000 won to 500,000 won.

This wave of target price cuts by securities firms is due to Nongshim's poor second-quarter results this year. In the second quarter, Nongshim recorded sales of 867.7 billion won, up 0.8% year-on-year, and operating profit of 40.2 billion won, down 8.1%. These figures fell short of market expectations: FnGuide's consensus for Nongshim's second quarter was 898.2 billion won in sales and 48.2 billion won in operating profit. Ryu Eunae, a researcher at KB Securities, explained, "The target price was lowered because the annual operating profit estimate for this year was revised down to reflect the second-quarter results." Joo Younghoon, a researcher at NH Investment & Securities, also said, "The main reason for the target price cut is the revision of the 2025-2026 earnings estimates to reflect the weak second-quarter results."

Nongshim Toowoomba.

Following the disappointing second-quarter results, Nongshim's stock price also declined. On August 18, after the earnings announcement, Nongshim fell by 3.81%.

The situation looks even gloomier when compared to competitors. Samyang Foods posted an operating profit of 120.1 billion won in the second quarter, up 34% year-on-year. During the same period, sales increased by 30% to 553.1 billion won. While sales met consensus, operating profit fell short. However, securities firms responded differently than they did to Nongshim. After the second-quarter earnings announcement, six securities firms raised their target price for Samyang Foods. Researcher Ryu explained, "We raised Samyang Foods' target price by 10% compared to before, reflecting the company's brand power in the global market and revising the estimated compound annual growth rate of operating profit for 2026-2031 from 9.7% to 12.8%." She added, "Although second-quarter results fell short of market expectations due to preemptive marketing investments ahead of increased export volume, this was an investment for growth. Demand remains strong, especially in the US, so the company's fundamentals are still robust." Samyang Foods' stock price has risen 80% this year, joining the ranks of "emperor stocks." In contrast, Nongshim's stock price has fallen 2.01% this year, dropping from the 400,000 won range a month ago to the 360,000 won range. Since losing the top spot in the ramen sector to Samyang Foods last year, the gap has only widened.

There is a consensus that a recovery in growth is necessary for Nongshim's stock price to rise. Researcher Joo commented, "The current stock price already reflects much of the concern over poor results, so further declines are likely limited. However, to increase corporate value, the company must first restore its long-stagnant top-line growth."

In particular, the overseas performance of Shin Ramyun Toowoomba, which contributed to the decline in profitability in the second quarter, is now crucial. Kwon Woojeong, a researcher at Kyobo Securities, noted, "Profitability is disappointing, mainly due to intensified global marketing in the US following the global launch of Shin Ramyun Toowoomba." He added, "For a stock price rebound, we need to see a visible increase in sales and profit contributions from Shin Ramyun Toowoomba globally."

Nongshim Toowoomba US Food Truck.

Gradual Improvement Expected in the Second Half

Gradual improvement in performance is expected in the second half of the year. This is due to the combined effects of price increases in Korea and the US, as well as expanded distribution of Toowoomba. Son Hyunjung, a researcher at Yuanta Securities, said, "The full effect of domestic price increases will be reflected in the third quarter, so sales are expected to show moderate growth compared to the first half. In the US, an average price increase of over 10% was implemented for all products in July, and Toowoomba products have entered the main shelves at Walmart." She added, "Second-half results are expected to improve, mainly due to the recovery of domestic consumer sentiment and the effects of price increases. Overseas, cost burdens will persist, but the expanded presence of Toowoomba in the US and the impact of price increases will gradually contribute more."

However, the pace of improvement is not expected to be as fast as hoped. This is because increased costs for establishing Toowoomba in the global market are inevitable in the second half as well. Park Sungho, a researcher at LS Securities, said, "Marketing expenses will inevitably rise in the second half due to the expanded entry of new products into the global mainstream." He continued, "As a result, profit declines at the North American and Chinese subsidiaries are unavoidable in the third quarter. In the fourth quarter, however, we expect profit growth thanks to the entry of new products into Walmart and Kroger in the US, the effect of the July price increases for all ramen products, and expanded distribution channel coverage in China." He added, "At the end of the year, when a full-fledged earnings turnaround is expected, we may also see a rebound in the stock price."