[Click eStock] "Orion, Expanding Profit Momentum in the Second Half"

[Asia Economy Reporter Song Hwajeong] Yuanta Securities maintained a 'Buy' investment rating and a target price of 150,000 KRW for Orion on the 20th, expecting an expansion in profit momentum in the second half of the year.

Orion's combined sales in July recorded 190 billion KRW, a 2% increase compared to the same period last year, while operating profit decreased by 9% to 29.3 billion KRW. The year-on-year sales growth rates by corporation were Korea 3%, China -0.4%, Vietnam 3%, and Russia 19%. Researcher Park Eunjeong of Yuanta Securities analyzed, "The decline in operating profit has eased compared to the first half," adding, "Cost efficiency improvements are underway, and especially in China, efforts to reduce costs such as expanding bidding and utilizing substitutes have led to a decline in manufacturing cost ratio for the first time since January."

With the decision to raise prices for pies in China, a trend reversal in profit growth rate is expected in the second half. Although international grain prices have shown a sharp rise, Orion prioritized profit and loss defense through internal control methods rather than product price increases. As a result, operating profit decreased by 14% in the first half, and China, the largest sales market, saw a 34% decline in profit during the same period. Researcher Park explained, "Orion decided to raise prices in the pie category in China during the third quarter," adding, "This is the first price increase since 2011 for the pie category. Although the specific items and increase rates are undecided, a trend reversal in profit growth rate is expected in the second half, and expansion to other items or regions is also anticipated."

Profit momentum is expected to expand in the second half. Researcher Park said, "Due to a relatively easy base in the second half, sales are expected to grow by 10% and operating profit by 25%," adding, "Furthermore, if price increases proceed in the third quarter focusing on key categories in China, the profit growth rate will increase even more."