LS Securities said on the 20th that Samyang Foods is expected to continue its growth trend this year as well, based on solid demand. It maintained a Buy rating and a target price of 1.75 million won. Samyang Foods' previous trading day closing price was 1,376,000 won.
Samyang Foods is expected to post first-quarter sales of 663.6 billion won and operating profit of 161.2 billion won this year. Those figures are up 25.4% and 20.4%, respectively, from a year earlier and are expected to be in line with the consensus (the market average forecast).
Park Sung-ho, an analyst at LS Securities, said, "Sales and profitability will both improve thanks to robust growth at overseas subsidiaries and the weak won," and added, "For the U.S. subsidiary, sales are estimated to grow 36% from a year earlier."
There were some export gaps to Canada and Mexico in January, but as the utilization rate of the Miryang Plant 2 rose, exports in February–March were estimated to have regained a solid growth trajectory.
Park said, "Supply remains tight relative to North American demand, so strong sales growth is expected to continue in the second quarter." Sales at the China subsidiary were also estimated to grow 26% from a year earlier.
A high exchange-rate environment in the first quarter and an increase in the average selling price (ASP) were analyzed to have driven profit improvement. Advertising-related expenses reflected this quarter were also estimated at about 17 billion won, a sharp decrease from the previous quarter.
Park explained, "There is a possibility that advertising expenses will increase in the second quarter, but lower fixed-cost burdens, cost reductions, and the impact of last year's price hikes more than offset that."
Accordingly, the company was projected to continue a comfortable growth trend this year as well, based on solid demand.
Park explained, "There is a possibility that cost pressures will expand due to the Middle East situation, but Samyang Foods has a business structure that can offset this," adding, "A strong dollar leads to higher sales and improved profitability."
Regarding packaging materials, a recent issue, the company said it has secured additional supplies through a Chinese counterparty, and that packaging materials account for a low share of total costs.
Park said, "Samyang Foods' share price is continuing its rally, but we still judge that valuation appeal remains intact."