 |
Nongshim Headquarters. (Photo = Nongshim) |
[Alpha Biz= Paul Lee] On Thursday, NH Investment & Securities projected that Nongshim would see a full-fledged earnings recovery from the second quarter of this year, as price hikes for key products have been implemented. The firm maintained its "Buy" rating and target price of 490,000 KRW.
"Last year, Nongshim's operating profit declined sharply due to the rising cost burden from increased raw material prices and higher promotional expenses to counter shrinking domestic demand," NH Investment & Securities stated. "This downward trend in operating profit is expected to continue through Q1 2024, but concerns over earnings have already been reflected in the stock price."
The brokerage firm emphasized the need to focus on positive catalysts going forward, stating, "Nongshim raised the prices of 17 products, including Shin Ramyun, by an average of 7.2% on March 6. This effectively reverses the price cuts implemented in July 2023."
NH Investment & Securities estimated that this price increase would improve operating profit by approximately 20 billion KRW annually. Additionally, it noted that overseas subsidiaries are expected to see a sales rebound with the global launch of the new product "Shin Ramyun Tumba."
Nongshim reported an "earnings shock" in its Q4 2023 results, with consolidated revenue and operating profit declining by 0.2% and 47.6% year-on-year to 855.1 billion KRW and 20.4 billion KRW, respectively. These figures fell short of market consensus by 3.18% and 46.03%, respectively. The underperformance was attributed to one-time expenses related to ordinary wages and ongoing cost pressures from higher raw material prices.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
