IBK Securities analyzed on the 20th that amid declining profits for Nongshim, the most important factor this year is whether Shin Ramyeon Tumba will establish itself in both domestic and international markets. They lowered the target stock price from 550,000 won to 450,000 won, a decrease of 18.2%, while maintaining an investment opinion of 'buy.' The closing price for Nongshim on the previous trading day was 341,000 won.
IBK Securities projected that Nongshim's domestic sales in the fourth quarter of last year would improve slightly. The slow sales of snacks and beverages are expected to be offset by the effects of new noodle product launches, such as Shin Ramyeon Tumba, and strong exports to Europe and Southeast Asia.
In contrast, the profit decline is likely to continue due to rising palm oil prices, sales incentives (such as promotional expenses and logistics costs), and increased labor expenses (employee benefits). The overseas sector is expected to show an 8.3% improvement compared to the previous year, driven by a recovery centered on the United States. However, profit margins are expected to decrease due to rising promotional and entry costs, as well as initial cost burdens from the operation of the second factory in North America.
IBK Securities estimated that Nongshim's sales and operating profit in the fourth quarter of last year would reach 889.5 billion won and 31.1 billion won, respectively. This figure has been adjusted downward from the previous estimate of sales of 928.4 billion won and operating profit of 44.6 billion won. The operating profit is below the market consensus of 42.8 billion won.
Kim Tae-hyun, a researcher at IBK Securities, noted, 'The domestic consumption slowdown trend is expected to continue this year. However, initial sales of Shin Ramyeon Tumba have been good, and there are expectations for expanded sales overseas, particularly in the U.S., so we maintain a buy opinion.'
In fact, Tumba's domestic monthly sales are approximately 6 billion won, which is significant when considering that the average monthly sales for newly launched ramen products are in the range of 3 billion to 4 billion won. Additionally, Tumba is currently being produced on some new lines at the second factory in the U.S. and has been sold in the Asian market since last November (with monthly sales of 2 billion won), and it is expected to be available in mainstream stores like Walmart between March and July.
Researcher Kim stated, 'This year, the key will be whether Shin Ramyeon Tumba can establish itself in domestic and international markets. While an increase in fixed costs is expected due to the expansion of the second factory line in North America until the first half of the year, profit margins are projected to improve significantly as the utilization rate rises in the second half.'