“Samyang Foods: Limited Impact from a Stronger Won, Robust Growth”

[Financial News] Shinhan Investment & Securities forecast that Samyang Foods would continue to post robust growth despite concerns that the stronger won could slow earnings growth. It maintained its “Buy” rating and target price of 1.75 million won.
Cho Sang-hoon, a research fellow at Shinhan Investment & Securities, said on the 16th that Samyang Foods’ third-quarter revenue was expected to rise 29.4% year over year to 818 billion won, while operating profit would increase 42.3% to 186.3 billion won, in line with market consensus.
Exports are expected to grow about 36% year over year in the third quarter, as overseas demand holds up despite the stronger won. Exports are projected to account for as much as 85% of total revenue. Cho said concerns that exchange-rate fluctuations would slow growth were limited, given the company’s high profitability and brand competitiveness.
He also forecast that profitability would remain solid. Higher palm oil prices and transportation costs are expected to lower the gross profit margin to 46.6% in the third quarter from 48.1% in the second. However, lower marketing costs are expected to keep the operating margin at 22.8%, similar to the previous quarter.
He also cited expanded production capacity as a growth driver. Higher utilization at the Miryang Second Plant and the expected completion of the China plant at year-end are expected to support top-line growth. In particular, the China plant’s annual production capacity is set to increase to 1.13 billion servings from the original plan of 820 million.
Cho said the company was “at the beginning of a period of expanding overseas momentum,” adding that a recent share-price correction had brought its 12-month forward price-to-earnings ratio (PER) down to around 13 times, easing valuation concerns.

[email protected] Lim Sang-hyuk Reporter