Securities firms raise outlook for Nongshim amid soaring overseas sales

Korean soccer star Son Heung-min poses with Nongshim's steady-seller Shin Ramyun product in this promotional poster. Courtesy of Nongshim

By Kim Jae-heun

Local securities firms have raised the outlook for Nongshim on the back of its soaring instant noodle sales in the United States and other overseas markets, according to analysts, Monday.

Shinhan Securities increased its target stock price for Korea's largest instant noodle maker by 10 percent from 520,000 won ($390) to 570,000 won, as its operating profit is expected to reach an all-time high this year.

In the second half of this year Nongshim's sales and operating profit reached 837.5 billion won and 53.7 billion won respectively, which exceeded the securities firm's consensus by 50 percent.

“The company's efforts to cut the cost of raw materials and marketing expenses as well as its increased sales, both in domestic and overseas markets, have attributed to its notable performance in the second quarter,” a researcher at Shinhan Securities Cho Sang-hoon said. “It was especially impressive to see its operating profits created abroad as they accounted for nearly half of the whole proportion.”

Cho also pointed out that Nongshim's sales and operating profit in the United States have soared 13 percent and 473 percent, respectively, due to its sales expansion drive at large retail channels.

“Nongshim's overseas sales and operating profit accounted for 24 percent and 42 percent of the overall portion in consolidated figures, which will continue to increase the company's profit,” Cho added. “In the meantime, the company is now expanding its facility lines at its second factory in the United States and when it is complete, in the first half of next year, Nongshim can expect to become the No.1 player in the U.S. market.”

NH Investment & Securities also raised its target stock prices for Nongshim from the previous 510,000 won to 560,000 won, saying its corporate value is expected to grow continuously thanks to the rapidly improving profitability index.

“Nongshim is showing strong growth signs regarding overseas sales centered on the U.S. market. We should not underestimate the growing popularity of instant noodles in the world as a short-term issue,” a researcher at NH Investment & Securities Joo Young-hoon said.

Recently, NH Investment & Securities raised the food firm's annual operating profit estimated for next year to 236 billion won from 220 billion won.