Samyang Foods to sustain third-quarter growth despite FX headwinds; target price: 1.85 million won

[Financial News] Korea Investment & Securities forecast that Samyang Foods would post results in line with market expectations for the third and fourth quarters, supported by solid global demand despite a stronger won and delays in exports to Europe. It maintained its Buy rating and target price of 1.85 million won.
In a report on the 21st, Korea Investment & Securities analyst Choi Go-un projected Samyang Foods’ third- and fourth-quarter revenue at 808.3 billion won, up 28% from a year earlier. Operating profit was estimated at 184.6 billion won, up 41% and in line with market forecasts.
With overseas sales accounting for more than 80% of the total, a stronger won is a negative factor for earnings. However, steady global demand for Buldak products and more efficient marketing spending than in the second quarter are expected to offset the impact of the weaker exchange rate.
“For Samyang Foods, with a growth rate of 30% to 40%, there are many earnings-improvement factors more important than exchange rates,” analyst Choi explained.
Sales in the Americas were expected to rise 4% from the previous quarter and set another record, as demand increased evenly across established core distribution channels and new outlets such as those in South America. China sales were estimated to have grown 10%, boosted by the volume effect of Singles’ Day.
In Europe, sales growth was expected to be limited despite rising demand, due to shipping disruptions and delays in recognizing sales following a change in the UK distributor. Palm oil prices and logistics costs also put more pressure on the business, but some one-off expenses are expected to disappear and advertising costs to fall to around 4% of sales, keeping the operating margin similar to the previous quarter.
The key factors affecting earnings were identified as production capacity expansion and logistics, rather than exchange rates. Higher container shipping rates, port congestion and shipping delays due to the suspension of operations at Busan Dongwon Terminal could remain a burden through the fourth quarter.
The Jiaxing factory in China, scheduled to begin operations early next year, will have capacity equivalent to 40% of current production capacity. By contrast, the market forecast for next year’s revenue growth is just 21%, indicating that the effect of the factory’s operations has been factored in conservatively. US tariff refunds and potential price increases for products overseas have also yet to be included in operating profit forecasts.
“Even after factoring in the weaker exchange rate, the downward revision to earnings forecasts will be limited,” analyst Choi said. “With the share-price decline having lowered only the valuation, we see this as an opportunity to buy at the bottom.”

[email protected] Lee Jeong-hwa Reporter