[Click eStock] Orion, Current Price at Historical Low "Profit Harvest"

[Asia Economy Reporter Lee Seon-ae] DS Investment & Securities announced on the 25th that it maintains a buy rating and a target price of 130,000 KRW for Orion.

Jang Ji-hye, a researcher at DS Investment & Securities, explained, "Orion's target price remains the same, applying a target multiple of 18 times, which is a 10% discount compared to global peers based on this year's performance," adding, "The current stock price corresponds to a price-to-earnings ratio (PER) of 12 times based on this year's earnings, which is historically low." The closing price on the previous day was 93,200 KRW.

In April, Orion's combined monthly sales by country recorded sales of 206 billion KRW (19%) and operating profit of 30.6 billion KRW (45%). Sales growth in Vietnam, measured in local currency, continued at 31%, and China showed sales growth of 3.1% for the first time in seven months. The combined operating profit margin improved by 2.7 percentage points compared to the same month last year and by 0.3 percentage points compared to the previous month. Despite differences in sales scale, profitability was improved through promotional cost efficiency, process improvements, sales growth, and raw material sourcing efficiency amid intensifying global raw material burdens.

Over the past two years, Orion has restructured its distribution channels in China and Vietnam. In China, the direct sales organization was eliminated and indirect sales through small and medium-sized retailers were pursued, whereas in Vietnam, the approach shifted from indirect to direct sales. In China, to expand coverage of the fragmented TT channels across 3 to 4 cities that are geographically distant, logistics and marketing were strategically entrusted to large small and medium-sized retailers to enhance efficiency. In Vietnam, where market growth rates are high, the headquarters has taken a more aggressive approach to marketing, logistics management, and systematic inventory control to expand market share. Although it is too early to judge the success of these strategies under abnormal market conditions due to COVID-19, Vietnam's sales have been growing rapidly since the second half of last year, and China's sales have started to show growth despite sluggish domestic demand, which is viewed positively.

Researcher Jang stated, "Orion is minimizing price increases amid a price hike rally across the domestic and international food industry, so continuous growth through market share expansion is expected in the future."