 |
Daishin Securities. (photo = Yonhap news) |
[Alpha Biz= Paul Lee] Daishin Securities lowered its target price for Nongshim from 480,000 won to 460,000 won on Thursday, citing concerns over the potential deterioration of profitability due to the burden of marketing expenses in overseas markets and rising raw material prices. However, the firm maintained its 'Buy' rating, forecasting strong growth in export performance.
Daishin Securities stated, "With domestic consumption slowdown expected to persist this year, Nongshim's short-term growth in the domestic market will be limited. However, the likelihood of increasing promotional expenses to mitigate further profitability decline is low," the firm noted.
This is due to the previous performance decline caused by increased promotional expenses. Nongshim reported fourth-quarter sales of 855.1 billion won and operating profit of 20.4 billion won, with operating profit declining by 48% compared to the previous year. The operating profit also fell short of consensus expectations.
Daishin Securities explained, "Despite good sales of the new product 'Shin Ramyeon Tombba' and strong ramen exports, domestic consumption slowdown limited sales growth. The overall cost burden increased due to rising palm oil prices and higher promotional expenses, along with one-off wage costs of 9 billion won related to statutory wages, which further worsened profitability."
The firm, however, expects gradual performance improvement as Nongshim plans to expand its market through the establishment of a European subsidiary. Additionally, the global launch of Shin Ramyeon Tombba next month and SKU expansion in the U.S. market are expected to enhance export performance, Daishin Securities predicted.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
