[Click eStock] "Orion, Growth of Chinese Subsidiary... High Expectations for Q1 Performance"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 12th presented a buy rating and a target price of 170,000 KRW for Orion, reflecting growth expectations for its Chinese subsidiary.

First-quarter sales and operating profit are estimated to grow by 11.8% and 11.6%, reaching 603.4 billion KRW and 108.3 billion KRW, respectively. While industry growth in the first quarter is expected to be limited, Orion's performance momentum is anticipated to increase further. This is due to expectations of strong sales of the Lunar New Year effect and new products such as 'Songsong Cake' and nut bars, as well as market share gains despite last year's strong performance.

Sim Eun-joo, a researcher at Hana Financial Investment, said, "Sales of the Chinese subsidiary increased by 16% compared to the same period last year, driving overall performance improvement," adding, "It is estimated that solid momentum was maintained in February following January as Lunar New Year volumes were fully reflected."

This year, consolidated sales and operating profit are estimated to grow by 8.5% and 16%, reaching 2.4201 trillion KRW and 435.7 billion KRW, respectively. The Chinese subsidiary is expected to achieve sales growth due to active new product launches such as mass-produced bread and nut bars, the Lunar New Year effect, and expansion of the 'Taokenoi' product line.

Expectations for price increases are also high. The Chinese subsidiary has not raised the price of Choco Pie since 2011. If the Choco Pie selling price increases by 10%, Orion's consolidated operating profit is predicted to improve by 6% compared to the existing estimate.

Researcher Sim said, "Korea, Vietnam, and Russia will also demonstrate solid sales growth through new products and flavor expansions," and added, "In India, Choco Pie production is beginning in earnest, which will serve as another growth pillar in the mid to long term."

She continued, "The price-to-earnings ratio (PER) is positioned at the historical lower band, and considering the performance momentum that will stand out within the industry, an active buy perspective is valid," adding, "It will be an alternative during the earnings season."