Daol Investment & Securities said on the 14th that while solid demand for Samyang Foods is being confirmed, expectations for a rise in export value are also growing, and it expects a strong rebound in the share price. It maintained its investment opinion at "Buy" and raised its target price to 1.9 million won from 1.7 million won. Samyang Foods' closing price in the previous session was 1.295 million won.
Samyang Foods disclosed the previous day that on a consolidation basis for the first quarter of this year, it posted revenue of 714.4 billion won and operating profit of 177.1 billion won. Revenue rose 35% and operating profit 32% from a year earlier, both the highest quarterly figures on record. Both revenue and operating profit far exceeded the consensus (revenue 674.6 billion won, operating profit 163.8 billion won).
Lee Dayeon, an analyst at Daol Investment & Securities, said, "As inventories at major subsidiaries were cleared smoothly, revenue at the China and Europe subsidiaries increased sharply," and noted, "Despite higher fixed costs such as additional hiring of production personnel and recognition of performance bonus provisions, production volume increased thanks to a higher utilization rate at the Milyang Plant 2 and improved production efficiency at existing plants."
In March and April this year, Samyang Foods' ramen export value reached 163.0 billion won and 173.2 billion won, up 23% and 6.3% from the previous month, respectively, setting a record high. May has many holidays and fewer business days, so export value is expected to dip slightly from the previous month, but it projected the export value level will gradually rise on the back of extended operating hours (20→24 hours) and the effect of replacing square-noodle lines for round-noodle lines at the Wonju and Iksan plants.
Even after reflecting in the estimates the various cost increases in freight rates, oil prices and packaging materials due to the Middle East war, it projected second-quarter operating profit will rise from the prior quarter thanks to higher utilization and increased output.
The analyst said, "Samyang Foods' share price has shown strong rebounds whenever confirmation of solid demand, heightened expectations for an increase in export value from higher utilization, and upward revisions to earnings estimates coincided," adding, "Right now is the intersection of those three conditions."