Instant noodle stocks boosted by largest exports in March

South Korea’s instant noodle stocks, such as Ottogi Co., Nongshim Co. and Samyang Foods Co. are rebounding amid expectations of performance improvement. The stocks, which have been sluggish for weeks due to the rise in grain prices, are bouncing back with record-breaking exports in March.

Ottogi closed at 471,500 won ($386.32) rising 0.75% on April 7. The stock price has rebounded 12.8% from its one-year low of 418,000 won on March 15. Nongshim shares increased by 13% from 280,500 won on March 15 to 317,000 won on April 7. Samyang Foods rose by 31.2% from 80,400 won to 105,500 won during the same period.

Instant noodle stocks, on an uptrend since late 2021, began to slow in mid-February as shortages of main ingredients wheat and palm oil increased concerns over the firms’ profitability. Due to the war between Russia and Ukraine, the two countries that produce 30% of wheat worldwide, the global wheat price has surged by 33% since early January. The palm oil price has also soared as Indonesia, producing 60% of the global palm oil, began to reduce its exports early this year.   

However, some market watchers say woes over the performance deterioration are excessive. As Korean instant noodle manufacturers order wheat flour from local flour mills, they are more sensitive to domestic wheat flour prices than to global wheat prices. Also, hikes in local wheat flour prices will be limited if global wheat prices stabilize in a few months as local mills are saving wheat for three to six months, market watchers said.  

The stocks of Ottogi, Nongshim and Samyang Foods will be defensive to the hikes in food ingredient prices, said DS Investment & Securities Co. analyst Jang Ji-hye. “As the three firms raised their instant noodle prices last year, they will be defensive to up to a 10% increase in wheat flour prices. If the local wheat flour prices surge, the firms might further increase the noodle prices,” said Jang.  

Korea’s instant noodle industry is garnering attention as exports hit a record-high 84.5 billion won in March, up 30.6% from the same month of 2021. Industry watchers are expecting that the overseas market will boost Korean noodle makers’ growth. Accordingly, analysts are raising some noodle makers’ profit estimates. The consensus estimate of Samyang Foods’ annual operating profit is 84.9 billion won as of April, compared with 79.5 billion won and 77.1 billion won reported in March and January, respectively.

In a bid to expand its presence overseas, Nongshim founded its second plant in the US last month. The company, ranked third with more than 20% of share in the US instant noodle market, aims for the top spot in the country with increasing production. Nongshim also plans to enter Mexico soon and join the top three in the country's instant noodle market within five years.

Write to Hyung-Gyo Seo at seogyo@hankyung.com
Jihyun Kim edited this article.