Daishin Securities lowers its price target for Nongshim

Daishin Securities Co. cut its price target on Nongshim Co.'s stock to 530,000 won ($397) from 550,000 won ($412) on Tuesday, saying the company's overseas sales recovery is slower than expected, leading to weaker-than-expected third-quarter results.

“We expected overseas sales to recover due to the easing of the base burden in the Americas in the second half of the year and the effect of replacing the distributors in China, but the recovery of the US and Chinese subsidiaries was slower than expected,” Daishin pointed out.

As a result, the brokerage lowered Nongshim’s Q3 operating profit estimate to 54 billion won ($40.4 million) from 57 billion won. 

Daishin also lowered Nongshim’s full-year operating profit estimate by 3% to 202 billion won from 208 billion won, and its operating profit estimate for next year by 6% to 221 billion won from 236 billion won.

“We expect a gradual recovery of sales in the Americas through the start-up of a new production line in the US at the end of the third quarter and the expansion of shelf space in Walmart. We also expect a recovery of sales in China in the fourth quarter,” Daishin added.

Daishin maintained a "Buy" rating on Nongshim, saying that the recent stock correction has eased valuation pressure, limiting further share price declines.

Write to Sung-Mi Shim at smshim@hankyung.com