[THE INVESTOR] Nongshim has hit bottom in the first quarter but will gain momentum, said KB Investment and Securities on May 16, upgrading the recommendation to a “buy” from a “hold” and raising the target price to 370,000 won from 340,000 won.

Its revenue in the first quarter climbed up 1.4 percent on-year to 563.1 billion won and operating profit by 6 percent to 34.4 billion won. Although the advance was minor it was line with market expectations. Revenue from instant noodles increased 3.9 percent and growth in the US and Japan was stable boosted by expanding sales channels, and its earnings will continue to improve, said analyst Park Ae-ran.

Its yearly revenue will rise 3.3 percent from last year to 2.28 trillion won and operating profit by 22.6 percent to 118.1 billion won. The view that growth of instant noodle market will be limited amid diversifying home meal replacement sector is unchanged. However, costs will be reduced as price competition for instant noodles alleviate. Prices of ramen will increase in line with that of flour, and earnings of Nongshim’s Chinese operations are picking up, pointed out the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)