[Click eStock] Orion, Continued Earnings Improvement... "Buy If It Drops Further"

DB Financial Investment Report
Operating Profit Expected to Reach 392 Billion KRW This Year

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained a buy rating and a target price of 180,000 KRW for Orion on the 16th, expecting the company's earnings growth trend to continue. They suggested that it would be better to buy after an additional stock price adjustment.

In the third quarter, Orion recorded sales of 598.9 billion KRW and operating profit of 108.8 billion KRW, increasing by 12.1% and 6.3% respectively compared to the same period last year. Although sales growth was favorable due to new product launches and market share expansion, the operating profit margin decreased by 1 percentage point year-on-year due to an aggressive expansion strategy of sales displays and an increased sales proportion of high-cost products such as Yongamsu.

Jaeheon Cha, a researcher at DB Financial Investment, said, “Sales exceeded estimates by 3.4%, and operating profit surpassed by 1.6%, recording solid results,” adding, “Despite the base effect from the same period last year, sales of the Chinese subsidiary grew by 14.3 percentage points, and Vietnam and Russia also continued double-digit sales growth.”

Domestic subsidiary sales also showed strong growth compared to competitors due to new product launches and market share expansion. Operating profit by subsidiary in the third quarter saw the domestic subsidiary slightly below expectations, but Russia and Vietnam continued a stronger-than-expected profitability improvement trend. Researcher Cha forecasted, “A strong growth trend compared to competitors is being maintained in the domestic market,” and “After removing seasonal fluctuations, solid sales growth and profitability improvements in China, Vietnam, and Russia will continue.”

With the ongoing trend of earnings improvement at expected levels, operating profit forecasts for this year and next year are 392 billion KRW and 410 billion KRW, respectively. Researcher Cha advised, “The recent stock price adjustment has eased valuation pressure, and the situation is not burdensome compared to Chinese confectionery companies listed in Hong Kong,” recommending, “If further stock price declines occur due to the Chinese Lunar New Year and seasonal effects, it would be good to buy at a low price.”