The price increase decision for Nongshim's ramen and snacks has led securities firms to forecast improvement in this year's performance. The securities sector has also raised their target stock prices unanimously.
IBK Securities maintained its investment opinion of 'buy' on Nongshim on the 7th and raised the target price from 450,000 won to 500,000 won, an 11% increase. LS Securities adjusted Nongshim's target price from the previous 470,000 won to 500,000 won.
There is significant anticipation that the price increase effect of Nongshim will take effect from the second quarter of this year (April to June). On the 6th, Nongshim decided to raise the domestic shipping prices of 17 brands of products, including Shin Ramyeon and shrimp chips, by an average of 7.2%. This is scheduled to take effect from the 17th.
The common opinion among securities firms is that the background of the price increase is due to the cost burden from rising prices of key materials and supplies.
Kim Tae-hyun, a researcher at IBK Securities, noted, "The rise in prices of key materials and supplies, including labor costs and electricity costs as well as palm oil and soup raw materials, has been a burden," adding, "In fact, last year's gross profit margin increased to 71.5%, resulting in a decline in operating margin."
Park Seong-ho, a researcher at LS Securities, also said, "The recent cumulative cost burden due to palm oil prices and high exchange rates, as well as increases in overall other expenses including labor costs, is assumed to have led to this decision."
Meanwhile, on the same day, Korea Investment Securities, Hyundai Motor Securities, and Hana Securities also released analyses on Nongshim, all maintaining a 'buy' investment opinion. They each maintained their target prices (450,000 won, 460,000 won, 540,000 won).
Sim Eun-joo, a researcher at Hana Securities, said, "This year will be the first year for Nongshim's overseas sales level-up," and noted that the global launch of the new product, Shin Ramyeon Tumba, will begin in March. She added that the North American subsidiary of Nongshim will further benefit from moving to the main display in Walmart, forecasting an annual double-digit sales growth.
Ha Hee-ji, a researcher at Hyundai Motor Securities, also projected that the effects of moving the main display of the U.S. subsidiary to Walmart and starting operations of the new capacity line at the second plant will become visible this year.