Hana Securities on the 26th said Europe is emerging as a new growth axis after the United States and China for Samyang Foods(003230), and maintained a "buy (BUY)" investment opinion and a target price of 1.8 million won. The previous trading day's closing price was 1.43 million won.
Sim Eun-joo, a Hana Securities researcher, said, "Second-quarter results once again confirmed strong growth in the overseas business," and noted, "Expanding exports to Europe and the launch of a new factory in China next year will be mid- to long-term growth drivers."
Samyang Foods' second-quarter consolidated revenue this year was 770.3 billion won, up 39.3% from a year earlier. Operating profit rose 46.7% to 176.2 billion won, and the operating margin was 22.9%. Excluding about 5 billion won in one-off expenses, operating profit would top 180 billion won, indicating profitability has stepped up.
Overseas revenue was 645.8 billion won, up 46.7% from a year earlier. Revenue in the United States and China increased 54.2% and 44.1%, respectively, leading overall growth. Exports to the United States and China were tallied at 203.6 billion won and 181 billion won, respectively.
Notably, exports to Europe exceeded 100 billion won for the first time on a quarterly basis. Hana Securities analyzed that ramen consumption in Europe is still lower than in major markets such as the United States and China, leaving significant room for growth ahead.
Sim explained, "Per-capita annual ramen consumption in major European countries is about four servings, far below the roughly 13 in the United States and Latin American countries," adding, "Given that countries of sale and distribution networks within Europe are still limited, the growth potential from higher penetration is large."
The operation of the new factory in China was also cited as a factor for future earnings improvement. The new China plant is equipped with total production facilities for 1.13 billion units and is expected to begin trial runs early next year. It was projected that a timeframe similar to the existing Miryang plant will be needed until output expands in earnest.
Sim said, "Depreciation is expected to increase by about 3 billion won per quarter due to the new plant coming online, but the effect of higher revenue from increased output will outweigh the expense burden," adding, "Once local production in China gets into full swing, the spare capacity at the Miryang plant can be used to target the U.S. and European markets."
Growth potential is also being confirmed in the Latin American market. Samyang Foods helped improve the performance of its Americas subsidiary in the second quarter by starting transactions with OXXO, a convenience-store distribution channel in Mexico.
Hana Securities estimated that third-quarter consolidated revenue and operating profit will be 811.4 billion won and 187.5 billion won, respectively. That would be increases of 28.4% and 43.2% from a year earlier.
However, the ramen export growth rate in July was 15.2% from a year earlier, somewhat below market expectations. Hana Securities judged that delays in some shipments due to typhoons had a significant impact.
Sim said, "Global consumer preference for the Buldak brand remains solid," adding, "Second-quarter same-store sales growth at Walmart in the United States is also estimated at about 14%, and the company continues to post stronger growth compared with global ramen makers."